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NOV 5 2003 







APR - 1 2303 



ROOM 113 


10:34 A.M. 

465- R 

3 1223 06446 2113 





ROOM 113 



10:34 A.M, 

Reported by: 

Evelyn J. Mizak 
Shorthand Reporter 

2 50337 SFPL: ECONO JRS 
^40 SFPL 10/24/03 10 










GREG SCHMIDT, Executive Officer 

PAT WEBB, Committee Secretary 

NETTIE SABELHAUS, Consultant on Governor's Appointments 






STAN L. DIXON, Member 

State Board of Forestry and Fire Protection 



Sierra Club of California 


State Board of Forestry and Fire Protection 

MARK PAWLICKI, Professional Forester 
Simpson Timber Company 

California Forestry Association 


California Licensed Foresters Association 



Independent System Operator Governing Board 


Independent System Operator Governing Board 





Proceedings 1 

Governor ' s Appointees : 

STAN L. DIXON, Member 

State Board of Forestry and Fire Protection 1 

Introduction and Support by 


Statement re: Commitment to Better 

Communication between Board and Legislature 2 

Questions by CHAIRMAN BURTON re: 

Old Growth Forests 2 

Clear-cutting 4 

Possibility of an Initiative 5 

Questions by SENATOR KARNETTE re: 

Cooperation between Agencies on 

Watershed Issues 5 

Request for Memorandum of Understanding 

Defining Responsibilities of Various 

Agencies and Departments 7 

Witness in Support: 


Sierra Club California 7 

Motion to Confirm 9 

Statement by CHAIRMAN BURTON re: 

Board's Failure to Act May Result in 

Initiative at Ballot Box 9 

Committee Action 10 


State Board of Forestry and Fire Protection 10 

Introduction and Support by 


Questions by CHAIRMAN BURTON re: 

Old Growth Forests and Protection of 

Hardwoods 10 

Restoring Coho Salmon to California's 

Rivers 12 

Questions by SENATOR KARNETTE re: 

Number of Staff on Board 13 

Ability of Board to be Independent 14 

Witnesses in Support: 

MARK PAWLICKI, Professional Forester 

Simpson Timber Company 14 

Questions by CHAIRMAN BURTON re: 

Job of Professional Foresters 15 

Reason for Diminishing Numbers of 

Coho Salmon 15 

Ownership of Simpson Timber 17 


California Forestry Association 17 

Questions by CHAIRMAN BURTON re: 

Many Recommendations of Scientific 

Review Panel Not Adopted by Board 18 


California Licensed Foresters Association 18 


Witness in Opposition: 


Sierra Club California 19 

Questions by SENATOR JOHNSON re: 

Any State That Does Better Job 

Than California 2 

Questions by CHAIRMAN BURTON re: 

Respond to Board's Inadequate 

Protection of Coho Salmon 21 

Respond to Accusation that Large 

Companies Are Exempted from Review 22 

Frequency of Rejection or Modification 

of Submitted Plans 23 

Employers of Professional Foresters 23 

Motion to Confirm 2 5 

Committee Action 26 


Independent System Operator Governing Board 26 

Background and Experience 2 6 

Questions by SENATOR JOHNSON re: 

Quote Equating Generators with 

War Criminals 2 7 

Municipal Utilities 28 

Questions by SENATOR ROMERO re: 

Pros and Cons for Consumers of the 

Seamless Grid Concept 2 9 

Status of LADWP in Seamless Grid 3 

VI 1 

Questions by SENATOR KNIGHT re: 

Measures Taken to Encourage or 

Support Efforts to Get Additional 

Power into State 31 

Is Crisis Over 32 

Motion to Confirm 32 

Committee Action 33 


Independent System Operator Governing Board 33 

Introduction and Support by 


Background and Experience 34 

Questions by SENATOR ROMERO re: 

Relationships between Board, FERC, 

Staff, Other Agencies 35 

Ability of Board to Act with 

Two Vacancies 3 6 

Questions by SENATOR KNIGHT re: 

Development of New Power Plants 37 

Renegotiations of Contracts Vs. 

Construction of New Plants 3 8 

Questions by SENATOR KARNETTE re: 

Possibility of ISO and FERC Coming to 

Agreement on Roles and Functions 3 8 

Motion to Confirm 3 9 

Committee Action 40 

Termination of Proceedings 40 

Certificate of Reporter 41 


CHAIRMAN BURTON: Governor's appointees, Stan 
Dixon, State Board of Forestry. 

Welcome . 

MR. DIXON: Mr. Chairman. 


MR. DIXON: Thank you, Mr. Chairman and Senators. 

I had hoped my good friend and former colleague 
on Humboldt County Board of Supervisors, Senator Chesbro, would 
be here to welcome -- 

CHAIRMAN BURTON: Speak of the devil. 

SENATOR CHESBRO: Mr. Chairman and Members, it's 
a great pleasure for me to be able to introduce two individuals 
to you who are not only constituents but very close personal 
friends of mine. First of all, Stan Dixon, and then secondly, 
Gary Rynearson, who's also before you today. 

As you know, timber issues are very contentious 
and difficult in my district, and I take my hat off to anybody 
who's willing to serve on the Board of Forestry and face the 
conflict and the challenges that that board regularly faces. 

By way of background, I've had the pleasure of 
working with Stan Dixon for, I don't know, I'd say 20-some 
years, because before Stan was elected to the Board of 
Supervisors, we served together as colleagues on the Board. I 
have a close, personal working relationship with him and am an 
admirer. And he was the only other Democrat for several years 
on the Board with me, and we fought the good fight together, and 

I support him wholeheartedly. 

Gary Rynearson is another long-time friend from 
Areata. And while he's definitely been on the forestry side of 
the line, representing the most environmentally oriented part of 
the county, the City of Areata on the Board of Supervisors, I 
appointed him to be my representative on the County's Forestry 
Advisory Committee because he was a forester in the county with 
the professional credentials who was willing to talk with, and 
communicate with, and work with those who were on the 
environmental side of that very, very difficult line. He has 
demonstrated an openness to new ideas and a commitment to sound 
forest and watershed science. 

So, I believe that both these individuals will 
continue to serve well, serve the public well on the Board of 
Forestry, and I encourage your support of them. 

CHAIRMAN BURTON: Thank you, Senator. 

Just an announcement for those who care. 
Mr. Jenkins, who was up today for the State Board of Education, 
has been taken off calendar because he's going to be leaving his 
position on the State Board, so he chose not to go through the 
arduous hearing today. 

MR. DIXON: Mr. Chairman, I don't really have any 
further opening statement. 

I would just like to make an observation that has 
been made acutely aware to me over the past six months. Since 
this process of reconfirmation started, I've had the opportunity 
to meet with your staff and members of the Rules staff regarding 
issues that I know you and other Senators are concerned with. 

But one of the things that was brought to my attention was the 
somewhat abysmal relationship between the Board and the 
legislative leadership from a communication standpoint. 

I just want to assure you, Mr. Chairman, that as 
Chairman of the Board of Forestry, I intend to change that in 
this next year beginning immediately, and that we will have open 
communication with your staff. And to the degree that the 
Senators feel necessary, with the leadership as well. 

CHAIRMAN BURTON: As Chair, what do you plan to 
do about the old growth forests, and what would recommend to 
protect them? And as part of old growth strategy, do you think 
that the oaks should be included? 

MR. DIXON: Mr. Chairman, I have many thoughts 
about the old growth issue. I think that because it has become 
a public trust issue at this point, even though there are things 
going on in the field of forestry regulation at this time that 
protect old growth to some degree -- 

CHAIRMAN BURTON: To a limited degree, one might 

MR. DIXON: A limited degree. 

I would offer, Mr. Chairman, to bring before the 
Board of Forestry a review of the Board's policy and State 
Forest Practice Rules as it relates to the issue of old growth. 
And I intend to bring that item to the Board at the February 
meeting as an item for their consideration on how we should 
review the state's policy with respect to that. 

Obviously, I'm only one member of the Board. 

CHAIRMAN BURTON: You are the Chairman. 

MR. DIXON: But I am the Chairman, and I have the 
jurisdiction to bring those things to the Board for discussion 
and dialogue and, potentially, modification of any Board 

CHAIRMAN BURTON: Well, you talk too long and you 
won't have to worry about it because it'll all be gone. 

MR. DIXON: Well, there's no question. 

The State of California, though, has preserved 
much of the old growth redwood that is left. There are issues 
that, thanks to your brother, actually, the State of California 
began to look at the need to address those issues a number of 
years ago. And I think that the Board of Forestry is — 
Mr. Chairman, we have a good Board right now. I think we have 
the kind of a board that is interested in reviewing the state's 
policies on critical issues, those issues that have become 
public trust issues. And I intend to see us follow through with 

That would include, Mr. Chairman, a review of the 
oaks policy throughout the state. 

CHAIRMAN BURTON: What are you going to do to 
focus attention on the impacts of clear-cutting? 

MR. DIXON: Again, Mr. Chairman, I am one of 
those that believes that the silvicultural method of 
clear-cutting is not one that ought to be banned. I think that 
the interest that I have is the rate of harvest in watersheds 
where clear-cutting is used. And I think that that — again, 
that is one of those policies that I will bring before the Board 
for consideration and review of Forest Practice Rules relating 

to that. 

CHAIRMAN BURTON: As you know, last year Senator 
Kuehl had a bill to kind of redo the State Board of Forestry, 
and there were discussions with the Governor's Office. And that 
bill was held up pending some action by the Board. 

But, you know, we're very concerned about that. 
I met with some representatives from the timber industry last 
week and told them that if something isn't done, they're going 
to be facing an initiative. And then, when you do an 
initiative, they end up, by and large, taking a very broad brush 
approach, which goes beyond solving the problem but could cause 
other problems. 

So, I would strongly encourage you to take the 
leadership, as Chairman of the Board, to get some stuff done or 
it'll be done for you. And for what it's worth, on the old 
growth issue, there's already two million dollars pledged. 

And I just think everybody's got more to do than 
worry about initiatives in this area, unless the agency that is 
under law required to do something about these issues doesn't do 

Senator Johnson. 

SENATOR JOHNSON: No questions, Mr. Chairman. 

CHAIRMAN BURTON: Senator Knight. Senator 
Karnette . 

SENATOR KARNETTE: I'm interested in how the 
industries and all the boards are working together for the water 
runoff and keeping the watersheds. 

What is your response to that? 

MR. DIXON: Well, from the stand point — 
Senator, I'm sorry, I didn't actually hear the first part of 
your statement. Were you saying the communication between -- 

SENATOR KARNETTE: The communication and the 
working together for the watershed concerns, actually. I know 
that there are many interests. And I want to make sure, I was 
just asking, if they are really working together and looking at 
the watershed problems? 

MR. DIXON: Well, I think for the most part they 
are. There are areas that the Board of Forestry needs to work 
more closely with the State Water Board, and to some degree with 
the Regional Water Boards that -- particularly as it relates to 
the harvest of timber. 

Currently, there is a management agency agreement 
between the State Board of Forestry, between the State Water 
Board, and between the Department, the California Department of 
Forestry and Fire Protection. That agreement specifies the 
responsibilities and really details those responsibilities. 

Currently there is a Memorandum of Understanding 
in existence that is being reviewed -- written, reviewed, and 
hopefully will come forward very quickly, that will clearly 
define the responsibilities for the Water Board, for the 
Regional Water Boards, and for the Department of Forestry as it 
pertains to the Clean Water Act, the Porter-Cologne Act, and 
Forest practice Rules. 

I believe that this document, having read it 
several times, will make the relationship between those agencies 
.much closer, much more well defined, actually does what Forest 


Practice Rules should do, and that's to protect the beneficial 
uses of water. That's a document that should be surfaced before 
the Water Boards soon and ultimately, in the spring I would 
hope, before the Board of Forestry. 

SENATOR KARNETTE: Will the Legislators or Rules 
Committee get a copy of that? I ' d be interested in seeing it. 

MR. DIXON: I would be happy to make copies of 
that available. 

SENATOR KARNETTE: I would like it. 

MR. DIXON: Certainly. 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: No questions. 

CHAIRMAN BURTON: Witnesses in support. 

MR. ALLAYAUD: I'm Bill Allayaud for Sierra Club 
California . 

We're here to support Mr. Dixon's appointment to 
the Board. We feel like it's sort of a new dawn on the Board. 
The Governor made some recent appointments which are really good 
for the Board. 

I don't think two years ago I'd be up here saying 
we support him, because there were a lot of problems with the 
Board, and we think there still are. 

I guess my disappointment today is, I maybe want 
to hear Mr. Dixon say, "Look, we acknowledge we have major 
problems here." Every water body on the North Coast is listed 
as impaired due to logging now, and we're poised to have the 
same problem in the Sierra Nevada from Yosemite to Shasta, where 
Sierra Pacific Industries wants to clear-cut, and it's already 


had many timber harvest plans approved to clear-cut a million 
acres of land and replace it with a monoculture. And that's 
where we get 75 percent of the state's drinking water. 

So, Rome is burning, and I think the Board needs 
jump up and say, "We're going to do something." 

The MAA, since '88, with the State Water Board, 
has been basically a failure. And they're saying, we're 
delegating the Water Board our authority to protect water 
quality to this agency, the Board of Forestry, and it's been a 
failure. And again, I'd think they say, "You know what? We're 
tearing it up and starting over, and we're going to do a darn 
good job because that public trust is what we're there to 
protect . " 

I guess the last thing I'd say is that Sierra 
Club, almost all of our members understand that we need to get 
the product to market, timber products, forest products, but 
there's a right way to do it and a wrong way to do it. And 
we -- I'm not saying we should call for a ban on clear-cutting 
today, although Frank Keeley's bill a couple years ago would 
have put a moratorium on it so we at least could see, are we 
doing the right thing. There may be cases where so-called even 
age management is appropriate, but I don't think the average 
citizen wants clear-cutting. They, the people of Sierra Nevada, 
lived with selective cutting for decade after decade with 
Georgia Pacific, LP, and now SPI's come in saying, "We're 
clear-cutting it all." 

People are waking up to this, going why? Why do 
we have to destroy the Sierra Nevada for over a 500-mile range, 

30 miles wide, to get the product we could get in another way? 

That's the issue here, and we're really looking 
to Mr. Dixon to provide that leadership, along with the new 
members, to do something about that, whether it's a moratorium, 
a ban on clear-cutting, a strong review of how they do the rate 
of cut in all these watersheds. 

I know Senator Karnette, last year when we were 
talking about other appointees to the Board, raised the issue of 
cumulative impact. I think clear-cutting a big problem. I'm 
not sure how the Board can deal with it. 

But again, we are here to support Mr. Dixon. We 
think he's part of like the new attitude on the Board that's 
positive, and we really look to having change and reform on this 
Board and in our Forest Practice Rules. 

Thank you. 

CHAIRMAN BURTON: Witnesses in opposition? 
Pleasure of the Committee. 


CHAIRMAN BURTON: Before we call the roll, if the 
Board does not act, the Legislature will act. And if the 
Legislature for whatever reasons does not act, people will go to 
the ballot with an initiative, and that may not be the best 
thing in the world. You know, the people sometime will be faced 
with whether or not we want a timber industry in the state, 
which we probably do, but we want one that's not -- Mr. Carter, 
you're here. Did you have anything you wanted to add? 

Mr. Chairman. I'm listening in awe of what you're saying. 


CHAIRMAN BURTON: And you'll bring this back to 
your clientele? Thank you. 

Call the roll. 

SECRETARY WEBB: Senator Karnette. 


SECRETARY WEBB: Karnette Aye. Senator Knight. 


SECRETARY WEBB: Knight Aye. Senator Romero. 


SECRETARY WEBB: Romero Aye. Senator Johnson. 


SECRETARY WEBB: Johnson Aye. Senator Burton. 


SECRETARY WEBB: Burton Aye. Five to zero. 

CHAIRMAN BURTON: Congratulations. 

MR. DIXON: Thank you, Mr. Chairman. 

CHAIRMAN BURTON: Did you have any relatives 
with you that you wanted to introduce? 

MR. DIXON: No, I didn't, Senator. 

CHAIRMAN BURTON: Mr. Rynearson. 

Why don't you, as you talk, just address whether 
or not you believe we need a policy on the old growth forests. 
You know, should we protect our hardwoods? 

We'll get to the compound, complex question 
after, but address those two in your opening, if you would. 

MR. RYNEARSON: Thank you, Senator and Members of 
the Committee. 

My name is Gary Rynearson. I'm a registered 


professional forester and manage a forestry and environmental 
consulting firm up in Eureka, and I'm a native Californian. 

The old growth issue is a very complex issue. 
It's one that, as a Board member, we passed, I believe it was 
last year, the big old tree exemption review, requiring that any 
tree of a certain age and a certain size had to have a review 
prior to harvesting under the exemption process. 

Under the timber harvesting plan and process, the 
old growth issue is reviewed, at times on a tree-by-tree basis, 
but certainly on a stand-by-stand basis for the significance of 
that tree for -- 

CHAIRMAN BURTON: Reviewed by whom? 

MR. RYNEARSON: It's reviewed by the — through 
the process by the Department of Forestry and the Inter-agency 
Review Committee that includes Fish and Game, Water Quality, in 
addition to California Geological Survey. 

So, those issues are reviewed through the THP 
approval process, and the significance of the old growth, again, 
sometimes on individual tree-by-tree basis versus timber stands, 
are in fact looked at. Trees or timber stands which provide 
significant wildlife potential or certainly have wildlife that's 
sensitive are listed under the federal or state ESA. Those 
stands are protected that are providing that habitat. 

In the broader sense, as far as the oaks, the 
Board last year passed a requirement for the northern and the 
southern portion of the state under the cumulative effects 
analysis review portion of the timber harvesting plan process, 
that landowners are required to address the current condition of 


the oaks and the drainage within their assessment, and how those 
oaks will be maintained and regenerated across their diameter 
and age classes, making sure that the -- that hardwood resource 
will be there for the use of wildlife. 

CHAIRMAN BURTON: You chaired the Scientific 
Review Panel that was commissioned by Governor Wilson. You 
recommended standards to protect the coho salmon from logging. 
Interim rules were adopted, but a lot of recommendations weren't 
adopted and report was criticized by the industry. I guess 
that's the result of either they weren't adopted as a result of 
that, and now the coho are on the Endangered Species list. 

As an industry rep on the Board, what do you 
think the industry can do to help restore the coho to our 

MR. RYNEARSON: In July of 2000, the so-called 
Interim Rules which adopted a significant portion of the 
recommendations of the Scientific Review Panel report were 
enacted and put into regulation. Those have been annual rules 
which have been renewed three times. They are now extended 
through December 31 of 2003 at this point. 

Almost verbatim, the rules to protect the fish 
bearing creeks, the Class One water courses where the salmonids 
exist, were adopted from that report almost verbatim. 

Also last year, the Board passed the Interim 
Watershed Mitigation Addendum, which specifically allows 
landowners to address conditions on the ground on an individual 
basis. There are also opportunities for landowners then to 
design specific protection measures which may be more or may be 


less than are currently -- than currently exist in the rules. 

Also, that system sets up a preconsultation with 
the various agencies involved in the process to help identify 
concerns prior to going into the timber harvesting plan process 
and help try to mitigate some of those concerns. 

CHAIRMAN BURTON: Senator Johnson. 

SENATOR JOHNSON: No questions, Mr. Chairman. 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: No questions. 

CHAIRMAN BURTON: Senator Knight. 

SENATOR KNIGHT: No questions. 

CHAIRMAN BURTON: Senator Karnette. 

SENATOR KARNETTE: I'm wondering about the 
independence of the Board. You have how many people working who 
report directly to you? 

MR. RYNEARSON: On the Board of Forestry? 

SENATOR KARNETTE: Yes, well, rather than the 
Department of Forestry. That report to the Board, how many? 

MR. RYNEARSON: We have essentially two, two 
segments. We have the administrative staff, which is the 
Executive Officer, and then a part-time Assistant Executive 
Officer, two clerical administrative, and then there's also an 
additional -- the Professional Foresters Examining Committee or 
the Foresters Licensing, which also reports directly to the 
Board and is considered Board staff. 

The Assistant EO is two-thirds time in that 
position, and he also has an additional administrative person 
working for him. 


So, total staff would be four. 

SENATOR KARNETTE: Do you think you can really be 
independent? Is that enough? Of course it's never enough; I 
realize that. Nobody ever has enough. 

MR. RYNEARSON: It would certainly be useful to 
have additional staff, especially staff that could interface 
with the staff of leadership with the Legislature. 

SENATOR KARNETTE: Well, it seems to me, if we 
want you to be independent, and we want that to happen, I just 
want to be sure it can. You think it can. 

MR. RYNEARSON: I think it can. As Chairman 
Dixon pointed out, we have a good Board. We have a Board that 
is supported by the Department of Forestry and Fire Protection 
staff, and frankly, we couldn't operate without them, without 
that help and that assistance. And we appreciate that. 

However, those folks who provide us additional 
staffing from the Department work at our request to develop 
documents, and help develop rule language, and that's done 
specifically at the direction of the Board without influence 
from the management of the Department. 


CHAIRMAN BURTON: Witnesses in support. 

MR. PAWLICKI: Mark Pawlicki of Simpson Timber 

We're in strong support of Mr. Rynearson. We've 
worked with him at our company for a number of years. 

And also, I've known him and his father before 
him who was also a forester. They both have a high degree of 


integrity and professionalism. 

I am also myself a registered professional 
forester, and I'm proud to be associated with Mr. Rynearson. 

CHAIRMAN BURTON: What do foresters do? 

MR. PAWLICKI: What do foresters do? Well, many 
things . 

CHAIRMAN BURTON: Tell you what tree to cut? 

MR. PAWLICKI: Well, yes. Under the California 
law, you're required to be licensed in order to practice 
forestry, and you set out prescriptions for forest management. 
You have to design timber harvest plans. The timber harvest 
plan has to be signed by a licensed forester before it can be 
submitted to the state for approval. 

There are many disciplines. There are watershed 
experts who are foresters, biologists, botanists, a whole range 
of things. And so, you have to pull together a series of 
disciplines to put together a timber harvest plan as a forester. 

CHAIRMAN BURTON: A forester recommends to his or 
her employer a timber harvest plan, right? 


CHAIRMAN BURTON: Then that plan ends up 
diminishing the coho salmon, for want of a better word, what 
went wrong? I would wouldn't imagine they do that 

MR. PAWLICKI: In the first place, the rules do 
not permit the Director of the Department to approve a plan that 
would do that. 

CHAIRMAN BURTON: How come it's happening? 


MR. PAWLICKI: Well, I think there are a lot of 
factors . 

CHAIRMAN BURTON: Is the Director of the 
Department stupid? 

MR. PAWLICKI: No, I think there are many factors 
that go towards the -- that contribute to the decline of the 
fish going back many years. And you've got to look at the last 
10-15 years of forest practice rules which have significantly 
increased. And you have to look at salmon populations over 
many, many, many years to try to get an idea. 

There's overfishing; there's certainly many other 
reasons that contribute to the decline. 

CHAIRMAN BURTON: How about the cutting down 
close to the river, and then the sludge goes in, and the salmon 
can't do what salmon do? 

MR. PAWLICKI: As Mr. Rynearson pointed out, we 
now have 150-foot wide buffer strips on Class One streams, which 
are the main fish bearing streams. You can't, you really can't 
get near those streams with logging because of those buffer 
zones. Those are now in place in the Forest Practice Rules. 
And it's only been in the last couple of years that they've been 
in place. 

And I think that those rules and other rules that 
they've put in place at the Board, from road management, and 
other mitigating factors, have gone a long ways towards 
protecting. In fact, there's no other state in the Union that 
comes anywhere near what we have as far as forest protection 
rules. And it actually — 


CHAIRMAN BURTON: How about Nebraska? 
[Laughter . ] 

MR. PAWLICKI: Nebraska, like many of the states 
in the south -- 

SENATOR JOHNSON: They harvested them all a long 
time ago. 

[Laughter . ] 

MR. PAWLICKI: There's a little bit of forestry 
in those states, but those states, particularly like in the 
south, are what we call wake-up-and-log states. You can wake up 
and go logging. 

We can't do that in California. You have to have 
a permit in this state. There are only two states that require 
a permit. 

CHAIRMAN BURTON: Who is your employer? 

MR. PAWLICKI: Simpson. 

CHAIRMAN BURTON: Who owns Simpson? 

MR. PAWLICKI: It's a family owned business based 
in Seattle. 


MR. BISCHEL: Mr. Chairman, Members of the 
Committee, my name David Bischel. I'm President of the 
California Forestry Association. 

We strongly support Mr. Rynearson for 
confirmation. I believe Gary, with his experience as president 
of an environmental consulting firm, as the past Chair of the 
Professional Foresters Examining Committee, which has oversight 
for the profession in the state, and his involvement and 


participation in the Science Review Panel have demonstrated 
clearly that he has the expertise, the professional expertise, 
the ethical standards, and the scientific background to occupy 
this position. 

Thank you. 

CHAIRMAN BURTON: What happened when there were a 
lot of recommendations in the review document, and then they 
weren't adopted? The Board just didn't like them, or the 
industry lobbied against them, or what? 

MR. RYNEARSON: A substantial portion of the 
recommendations were in fact put into regulation. 

CHAIRMAN BURTON: And a lot of them weren't. 

MR. RYNEARSON: I can't tell you a number by 
number, but I know the buffers — the buffers for Class One and 
treatment for Class One water courses, and the retention of the 
ten largest trees per 100 meters, all those are verbatim out of 
the Scientific Review Panel report. 



MR. HULTGREN: My name is William Hultgren. I'm 
with the California Licensed Foresters Association. I serve on 
the Forest Practices Committee as the Chair. 

We would urge you to confirm Mr. Rynearson. He 
has been actively involved in forestry as a past President of 
CLFA. He has a keen sense of proper functioning forest 
ecosystems by virtue of his active professional experience. And 
he's dedicated to preserving the integrity of the state's 
regulatory process as well as the protection of our watersheds. 


As a Board member, Gary has worked to implement 
watershed protection through the Road Rules Package and the 
extension of the T&I rules, or otherwise known as the Interim 
Rules . 

Thank you. 

CHAIRMAN BURTON: In opposition? 

MR. ALLAYAUD: Bill Allayaud again for the 
Sierra Club. 

I'm somewhat ambivalent sitting here. We 
understand this is an industry slot, and I'm not here to 
challenge Mr. Rynearson's credentials. I've talked to people, 
and I've talked to him before in his office, and I think they're 
excellent. And I also appreciate what the Registered 
Professional Foresters do in terms of their understanding of 
watershed processes, and geomorphology, and all the rest. 

However, one thing that bothers me is that the 
industry's still saying one of the main problems here is 
overfishing. How many coho salmon have you eaten in the last 15 
years? Coho salmon are not being over fished. 

The reason it's a regulated industry, the reason 
it was shut down was because the fish aren't returning because 
of damage to the watershed. 

The other thing you will hear is, it was the 
1950s before we had rules, and that damage is still there. Some 
damage is there, and we're working on restoration. 

It's ongoing damage. It's not just the 
Scientific Review Panel's report. The Dunne report, several 
reports prior to that, a series of reports that says there's a 


big problem in the way we manage and harvest timber in the 
state, and little has been adopted by this Board. The 
Scientific Review Panel recommendations, very few have been 
incorporated by the Board. 

The old growth review that Mr. Rynearson talked 
about is written so that most of the big guys are out. They 
have EIRs or habitat conservation plans, so really that old 
growth review, special review, is only done for mostly little 
projects . 

Finally I'll just note that until we do take 
seriously the Dunne report, the Scientific Review Panel report, 
and make real changes in the rules, it's the same old story. 
That's why we're opposing Mr. Rynearson. 

Thank you. 

CHAIRMAN BURTON: Senator Johnson. 

SENATOR JOHNSON: Just a quick question. 

I'm curious. What state would you point to that 
does a better job than California? 

MR. ALLAYAUD: Actually, that's another one. The 
industry the last couple of years, and in the bill we had, 
Senator Kuehl ' s bill last year, they were blaming the 
overfishing on the loss of the coho. 

They also say we have the strictest rules -- 

SENATOR JOHNSON: That doesn't answer my 
question. It's a simple question. It could be as the Chairman 
called it, Nebraska. 

What state would you point to as doing a better 
job than California has or is attempting to do on these issues? 


I'm not trying to embarrass you. I'm asking out 
of curiosity. 

MR. ALLAYAUD: I know. I asked the same question 
of people, because the industry keeps saying our rules are this 
thick, timber harvest plans used to be this thick, and now 
they're this thick, and I said, "Are they right or wrong?" 

The answer is, our rules are very thick. Are 
they best -- are they thicker than any other state? For sure. 
Are they the best? I don't know. 

The key thing here is NMFS, the National Marine 
Fishery people, have said that the rules adopted by this Board 
are inadequate to protect coho salmon. So, those things they 
did take from those reports and put into the rules are 
inadequate to protect the endangered species. 

CHAIRMAN BURTON: It would be damning them with 
faint praise. 

MR. ALLAYAUD: The answer is probably we have the 
strictest rules as far as I know. I'm not an expert. But they 
aren't protecting the resource or our water supply. 

SENATOR JOHNSON: Okay. It took you quite a 
while to get to that, but you don't have another state to point 
to then, I take it. 

MR. ALLAYAUD: I cannot. I'm not saying there is 
or is not. I don't know. 

CHAIRMAN BURTON: Would you like to respond to, 
it's not the fishermen; that it's what's happening with the 

And the fact that the big guys were exempted out, 


and so really the only review goes to little guys? 

MR. RYNEARSON: At this time, Mr. Chairman there 
are two habitat conservation plans that are approved in the 
states. There's one currently under review. 

Those reviews include specific analysis -- 
analyses of the old growth resource, and the retention or 
protection of those resource elements that are called the 
structural elements within those -- the timber -- or within the 
forests, as well as in one case the habitat conservation plan 
specifically sets aside a number of the remaining old growth 
stands for marbled murrelet habitat. 

CHAIRMAN BURTON: For all of the timber 
companies, or just the small ones? 

MR. RYNEARSON: Only for that property, only for 
that particular property for which that habitat conservation 
plan has been approved. And that habitat conservation plan was 
approved by the U.S. Fish and Wildlife Service and the National 
Marine Fisheries Service, the two federal agencies that are 
charged with the administration of the Endangered Species Act. 

CHAIRMAN BURTON: I think the point was that some 
of the things you pointed to with some pride exempt the big 
loggers, for the want of a better word, and only apply to the 
smaller timber companies. 

MR. RYNEARSON: The timber harvesting plan review 
still includes an analysis of the old growth for habitat, 
specifically on the vast majority of the industrial timber 
lands . 

Again, there's only two habitat conservation 


plans that are currently approved in the state. One of them is 
for a multi-species habitat conservation plan. The other right 
now is for a single species. 

CHAIRMAN BURTON: How many times when somebody 
comes in with a plan is it rejected or modified? 

MR. RYNEARSON: Plans are almost always 

CHAIRMAN BURTON: To a great extent, to a lesser 

MR. RYNEARSON: It depends on the resources that 
are at risk and the resources at issue. 

A timber harvesting plan is essentially a 
mitigation document. It's prepared by a registered professional 

CHAIRMAN BURTON: Who works for whom? 

MR. RYNEARSON: Who works for the landowner 

CHAIRMAN BURTON: Works for the company that 
wants -- and that's all right. 

MR. RYNEARSON: The company or the small 
landowner, yes. About 40 to 50 percent of the forest lands in 
California are owned by nonindustrial timber owners. 

CHAIRMAN BURTON: So, it's prepared by an 
employee of a person or company that will make money the more 
trees that are cut down? 

I'm not against it. I'm just trying to 
understand it. 

MR. RYNEARSON: It's prepared by a registered 


professional forester that works directly for the landowner, the 
in company, or they are a consultant that is working on the 
landowner's behalf. 

CHAIRMAN BURTON: So, they're working with 
somebody who has a vested interest to have more trees cut down. 
It's all right. You know, I don't expect them to hire Julia 

[Laughter . ] 

MR. RYNEARSON: Yes, they're working for 
somebody -- they've come to a forester because they'd like some 
portion of their property harvested; that's correct. 

CHAIRMAN BURTON: And if foresters get paid, just 
kind of idle curiosity, but do they get paid by the tree that's 
cut down, or they get paid a flat fee for creating the plan? Do 
they have a contingency in it, or what? Or do you know? 

MR. RYNEARSON: Most landowners would, I think, 
greatly appreciate a flat fee. Unfortunately, because of the 
nature of the system and the timber harvesting plan review 
process, there are too many uncertainties, so it's typically 
charged by the hour. So, there's no contingency -- it's not 
contingent upon the amount of trees harvested. 

Typically, most foresters charge an hourly rate. 
Or, if they work for a company, they get a flat salary. 

CHAIRMAN BURTON: Well, I intend to vote for you 
because you are the industry rep on the Board, and my problem in 
most instances is less with industry reps than it is with the 
public rep, who may as well be the industry rep the way they 
vote . 


And not withstanding the Sierra Club's testimony, 
I've been told by people that I respect in the environmental 
milieu that, all in all, for an industry rep, you ain't bad. 

[Laughter . ] 

MR. RYNEARSON: Thank you, Mr. Chairman. 

CHAIRMAN BURTON: Did you want to be heard on 
this, Mr. Carter? 


CHAIRMAN BURTON: You're not here on this one 

representatives from the company are represented by -- have 
members of their employees -- 

CHAIRMAN BURTON: If you're going to speak, you 
should come to the table. 

Senator Johnson. 

SENATOR JOHNSON: No questions. 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: No questions. 

CHAIRMAN BURTON: Senator Knight. 

SENATOR KNIGHT: No questions. 

CHAIRMAN BURTON: Senator Karnette. 

SENATOR KARNETTE: I don't exactly have a 
question, but I like you personally. I think you're a good guy, 
but it does disturb me. The whole process bothers me a lot. 

But you are the industry rep, as the Pro Tern 
said. So, I guess that's all I'll say. 

CHAIRMAN BURTON: Call the roll. 


SECRETARY WEBB: Senator Karnette 



Karnette Aye. Senator Knight. 


Knight Aye. Senator Romero. 


Romero Aye. Senator Johnson. 


SECRETARY WEBB: Johnson Aye. Senator Burton. 


SECRETARY WEBB: Burton Aye. Five to zero. 

CHAIRMAN BURTON: Congratulations. 

MR. RYNEARSON: Thank you, Senator. Thank you, 
Committee Members. 

CHAIRMAN BURTON: We look for better days, 
because as I said earlier to Mr. Dixon, we are not looking 
forward to an initiative, but I guarantee there will be one, and 
it will be, you know, it could well be the end of the industry 
in the state, so we don't necessarily want to do that. 

And I want to note the presence of Senator Kuehl, 
who Chairs the Committee, and she's here to show her interest in 
the issue. 

SENATOR KUEHL: Thank you, Mr. Chairman. 

CHAIRMAN BURTON: Mike Florio, Independent 
System Operator. 

MR. FLORIO: Thank you, Mr. Chairman and 
Members . 

I usually appear before the Legislature as senior 


attorney for TURN, The Utility Reform Network. Today I'm before 
you for confirmation as an appointee to the Independent System 
Operator Governing Board, a very much part-time position. 

I have been on the ISO Governing Board since it 
was created in May of 1997. Back then, it was the so-called 
stakeholder board, where each of us represented a certain 
interest group. I represented residential customers under that 
format. When it was made a governor-appointed board in early 
2001, I was appointed under that framework. And given further 
legislation, we're now subject to confirmation. 

I think usually people don't come before you for 
confirmation when they've already been in the job for six years, 
but that's the way this one has worked out. 

I think under the new Board format, we have 
worked very hard to improve the relationship between the ISO and 
other state agencies involved in the energy area. I think we've 
had some significant success. We've provided the staffing for 
the refund proceeding that recently brought forth an 
administrative law judge recommendation for 1.8 billion in 
refunds. That used to be a lot of money. 

Thank you. I'm available for questions. 

CHAIRMAN BURTON: Senator Johnson, any questions? 

SENATOR JOHNSON: Just quickly, I recall seeing 
newspaper quotes from you equating generators with war 
criminals . 

First, were you accurately quoted? And secondly, 
do you really believe that? 

MR. FLORIO: I think there I may have at one -- 


on one occasion made a somewhat intemperate remark of that 

SENATOR JOHNSON: As my friend Tom Hayden used to 
say, if it's written down it's forever. 

MR. FLORIO: I would say that I work regularly 
with many members and representatives of the generator 
community. I listen to their concerns and take them into 
account . 

And I don't think, you know, if you look at the 
record of what I voted on, that I could fairly be characterized 
as anti-generator. Obviously, we need them as part of our 

SENATOR JOHNSON: So it was a one-time, 
intemperate, impolitic remark, is what you're saying? 

MR. FLORIO: Well, and also in the context where 
the state was -- was being drained of literally millions of 
dollars a day of extremely high prices. 

SENATOR JOHNSON: At that time did you have 
similar comments about municipal utilities, the Los Angeles 
Department of Water and power? And in your mind at that time, 
were they war criminals as well? 

MR. FLORIO: I don't think we had the information 
back then that we have now about where the money was being 
made. And I think there have been some rather surprising and 
disappointing disclosures come out of that. 


Thank you very much. 

CHAIRMAN BURTON: I think actually he was 


paraphrasing Senator Peace's quote on the subject. 

[Laughter. ] 

CHAIRMAN BURTON: Senator Karnette. 

SENATOR KARNETTE: No questions. 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: Actually let me raise LADWP. I 
live in L.A., represent portions of the City of Los Angeles. 
DWP, of course, a major issue. 

There is concern about the seamless grid. I also 
have Azusa in my district as well, and recently they signed on 
with this regional plan. 

Can you help me understand better the benefits 
for consumers who are part of the munis as to why this seamless 
plan benefits them? What are the pros and cons overall? 

MR. FLORIO: I think the pro side is operating 
under a uniform set of rules, so that the real goal here is to 
get the cheapest possible power to consumers. And if you have a 
patchwork system where different rules govern throughout the 
state, it's more difficult for the most economical power to get 
to customers because there 're barriers. 

And really, the reason the ISO was created was to 
try to open up the electron highway, if you will, so the most 
economical power could flow to customers. And I think in 
general it's been successful at that. 

There have been other problems in the industry, 
obviously, that have created, you know, an economic disaster for 
the state, but I don't think it's the existence of the ISO or 
the way it has managed the grid that has caused that. It's a 


lot of other factors. 

SENATOR ROMERO: What's the status right now with 
LADWP in looking at the seamless grid? And what other munis are 
still out there? 

MR. FLORIO: Well, we've had Anaheim, Riverside, 
Azusa, and Banning, I believe, that have joined. SMUD, on the 
other hand, has left the ISO and set up their own separate 
control area. L.A. is still a separate control area. And you 
know, it's a complex set of issues. 

I was on a committee a couple of years ago that 
spent about six months trying to come up with a set of rules 
that would make it attractive for municipals to join the ISO, 
and I think it's -- L.A. is unique in its size as a municipal 
utility and the amount of transmission that it owns. There just 
seem to be some economic barriers to L.A. joining that I hope we 
can overcome. 

But it's a difficult issue, and there is some 
degree of loss of autonomy by being part of a larger entity. 

Now, we're still a California-only institution 
and probably will be that way for a while, but there are efforts 
to coordinate with other states, again, with the objective of 
having the cheapest possible power get to customers. But we get 
into issues of federal jurisdiction that have been very 
troublesome . 

So, you know, an entity that, like L.A., that is 
exempt largely from FERC jurisdiction would like to stay that 
way for a number of very good reasons. 




SENATOR KNIGHT: Thank you, Mr. Chairman. 

During the last crisis, there was a shortage of 
electricity. As a result, there was flurry of activity to build 
power plants and to site power plants across the state. 

Since then, a number of those have been 
cancelled, delayed. There is still a requirement for increased 
power. There will be as California continues to grow. 

What are we doing to encourage or to support the 
effort to get additional power into the State of California? 

MR. FLORIO: The ISO's role in that is limited. 
But what we have been able to do is put in place what are called 
interconnection rules that provide standard terms for connecting 
to the high voltage grid. Historically that has been very 
difficult for independent suppliers to get connected, and that 
process has been streamlined. 

We have tried to develop a reasonable set of 
market rules that can provide some certainty for suppliers about 
what the rules of the road will be. 

Obviously, it's a difficult time in the whole 
industry. It's not just in California that this is happening. 
A number of the generating companies, you know, are in severe 
financial distress. It really has little to do with anything 
that happened in California. It's a worldwide situation. 

SENATOR KNIGHT: So we in California will have to 
wait until the world satisfies the problem, and then maybe we'll 
be all right? 

MR. FLORIO: No, I don't think we have to wait. 


We've recently crossed a major milestone with getting the 
utilities back into buying power instead of the Department of 
Water Resources. The PUC has launched an effort to develop 
long-term plans for those utilities, and I think that will lead 
to contracts, which is really what it's going to take for 
suppliers to get financing. The banks aren't going to finance 
new power plants on the come any more. They're going to want to 
see a contract to supply a load-serving entity. 

One of the things I think was clearly learned 
during the crisis is the idea of buying everything on the spot 
market was a huge mistake. And now we are moving much more 
strongly into a structure with long-term contracts. And those 
contracts will enable new plants to get built when we need them. 

SENATOR KNIGHT: As we talked before, I'll ask 
the question again, is the crisis over? 

MR. FLORIO: I don't think it's over. I think 
it's moved from crisis management to now it being time to start 
building what's to come in the future. If we don't do that 
well, we will have another crisis. 

SENATOR JOHNSON: Senator Karnette. 

SENATOR KARNETTE: No questions. 

SENATOR JOHNSON: Witnesses in support? 
Witnesses in opposition? 


SENATOR JOHNSON: It's been moved, Secretary, 
call the roll. 

SECRETARY WEBB: Senator Karnette. 




SECRETARY WEBB: Karnette Aye. Senator Knight. 


SECRETARY WEBB: Knight Aye. Senator Romero. 


SECRETARY WEBB: Romero Aye. Senator Johnson. 


SECRETARY WEBB: Johnson Aye. Four to zero. 


voted Aye, making the final 

vote 5-0 for confirmation.] 
SENATOR JOHNSON: Congratulations. 
Sir, did you have anyone with you, family 



Senator Vasconcellos . 

SENATOR VASCONCELLOS: Mr. Chair and Members. 

SENATOR JOHNSON: The Dean of the Legislature if 
not of the Senate. 

SENATOR VASCONCELLOS: You're almost second, 
coming up. 

I'm pleased to be here today to introduce to you 
once again my friend and a distinguished citizen, Carl Guardino. 

Twenty-five years ago, David Packard, the 
legendary David Packard, created the Manufacturing Group in 
Silicon Valley to have the government and business work together 
to build a society that was good for work, good for society. 
It's been a remarkably successful operation. 


Carl became its president, I guess, four years 
ago -- six years ago already, and has done the same kind of work 
to help business and government work together to make the 
Silicon Valley the best place to work, to live and to work. And 
our prosperity certainly is in large part due to the efforts 
that he and his group have made. 

He's served on the ISO already. He's back to be 
renewed here. He's one of the finest people I know, and I urge 
your support. 

There's no one concerned at all about his 
integrity, his capacity, and his values. 

MR. GUARDINO: Thank you, Senator Vasconcellos . 

Vice Chair Johnson and Members of the Rules 
Committee, again, my name is Carl Guardino. 

In January of 2001, when I accepted the 
appointment to the Independent System Operator Board of 
Governors, we were in the midst of an energy crisis, and ISO was 
operating, of course, in a crisis mode. As President and CEO of 
the Manufacturing Group, I was keenly aware of the real impacts 
of this crisis on California's working families as well as job 
providers. Every day we dealt with the horrendous increases in 
energy costs and the all too frequent possibility of rolling 
blackouts . 

As a Board member, my top objectives have been to 
upgrade and expand the transmission grid for greater reliability 
and to meet demand, to stabilize the energy markets, to keep our 
professional staff, to exhort the FERC to investigate excessive 
energy costs, to work more closely with state agencies as we 


look out for California consumers, and to develop a blackout 
notification program to prepare and, hopefully, prevent further 
rolling blackouts. 

Throughout the past two years, the Board's 
actions have unanimously placed protection of California 
consumers as our top priority and responsibility. It is with 
that tenor and your approval that I look forward to continuing 
to serve on the ISO Governing Board. 

I appreciate your consideration. 

CHAIRMAN BURTON: No questions. 

Senator Johnson. 

SENATOR JOHNSON: No questions. 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: Let me just ask again, many of 
us have watched from afar this bizarre relationship between 
staff, Board members, FERC. 

What can you do? Given the recent rulings, et 
cetera, what do you anticipate to be the future of the Board? 
How do you meet? What is the relationship between staff and 
management of the Board? Is it working, and how does it 
ultimately come together to protect the consumers of California? 

MR. GUARDINO: Thank you, Senator Romero. 

Yes, our primary responsibility is just that, to 
protect California's consumers and working families. 

Our relationship with the FERC, as you know, the 
FERC rules over Cal-ISO. We exhort them with hundreds of 
filings a year to look out for California's consumers. We will 
continue to have that role. It is an interesting relationship 


based on, as you know, 1890. 

Relative to our relationship with our 
professional staff, our first effort was to make sure to stem 
the outflow of professional staff. We were losing about 12 
percent a year when we came on board just 24 months ago. That 
is now less than 5 percent. We've been impressed with their 
professionalism and dedication. 

Yet we also have primary responsibility and 
overall oversight in our Board capacity. That means a good 
check and balance system of making sure that the recommendations 
they make to us in our fiduciary responsibility, that we make 
sure that they are really what is best for the consumers of 
California . 

SENATOR ROMERO: Let me just ask again, in the 
present configuration, there are five members on the Board. 
There are three seated right now. 

In order to move something forward, what are the 
rules of the Board? Do you have to have a majority, which is 
three? Do you have to have two? What are the rules of the 
Board? Are you able to conduct your business with two 

MR. GUARDINO: Thank you. 

We will welcome two more people to joining the 
three of us that are still on the Board. If any of you are 
interested, come join us. 

We do need to be a full Board again. To answer 
your question, yes, we need a quorum of three. California 
Corporations Code calls that we at least have two at any time to 


continue to function at all, and we need those seats filled. 

Relative to is five enough, it could be slightly 
expanded, in my humble opinion, so that we can make sure to 
staff all the different committees, whether that's auditing, or 
HR, or the different committees, subcommittees, of the full 
board that we need to take this fiduciary responsibility in the 
seriousness that we all view it, and to do our best job for 35 
million Calif ornians . 


CHAIRMAN BURTON: Senator Knight. 


To follow up on the question that was asked 
before, and I assume you heard the discussion concerning the 
siting and constructing of new power plants, does the Governor's 
renegotiating contracts have anything to do with the fact that 
we may not be developing power plants at the rate we should to 
keep up with the California demand? 

MR. GUARDINO: Thank you, Senator Knight. 

I think our biggest challenge is our overall 
economic condition in California, making sure, as both private 
and public citizens, that we do everything we can to foster an 
environment where employers can prosper here, and that includes 
those generators who we want to prosper here. 

In our region of Silicon Valley, Calpine is not 
only a major employer but an energy provider who wants to build 
more plants that are environmentally sound and provide the 
energy we need. Right now, they are having to hold back on a 
major facility near Hayward, Russell City, 580 additional 


megawatts, because of the current economic conditions. You and 
your legislative colleagues have helped streamline the process 
in a great way for plant construction, and they view that as 
very positive. But right now, the overall economy has put that 
on the shelf. 

We need to get back to a condition where we can 
allow the Calpines of the world to thrive and prosper and 
provide the energy we need. 

SENATOR KNIGHT: And your answer to the question 
of whether renegotiations of contracts by the Governor, it 
doesn't have any effect on the construction of new power plants? 

MR. GUARDINO: That's not my area of expertise to 
be able to comment effectively. 

SENATOR KNIGHT: Do you have an opinion on it? 

MR. GUARDINO: I hate to go where my facts can't 
back me up one way or another. 

CHAIRMAN BURTON: Witnesses in support? 

Sorry, Senator Karnette. 

SENATOR KARNETTE: I was real interested in your 
remarks about working together with other agencies. I think 
that we really need to do more of that, because I hear from this 
group and the other group, and I don't know that the groups are 
talking to each other. 

My question is, do you think it's going to be 
possible for ISO and FERC to ever come to any kind of a 
reasonable agreement on the roles, the individual functions and 
roles, of the two groups? 

MR. GUARDINO: We certainly hope so. I will not 


soon forget a recent ISO hearing where FERC made it clear that 
they felt we were -- that we should be disbanded, and we were 
therefore illegal, and they should take us off to jail. 

And the Attorney General was saying, if we 
disbanded, we were then being illegal relative to the State of 
California law, and he would haul us off to jail. 

So, I had to make a decision: Would I prefer a 
federal penitentiary or a state penitentiary? 

[Laughter. ] 

So yes, we are hoping we can work that out. I 
have a very personal stake in whether we work out that 

[Laughter . ] 


Thank you. 

MR. GUARDINO: Thank you. 

CHAIRMAN BURTON: Call the roll. 

SECRETARY WEBB: Senator Karnette. 


SECRETARY WEBB: Karnette Aye. Senator Knight. 


SECRETARY WEBB: Knight Aye. Senator Romero. 


SECRETARY WEBB: Romero Aye. Senator Johnson. 


SECRETARY WEBB: Johnson Aye. Senator Burton. 


SECRETARY WEBB: Burton Aye. Five to zero. 


CHAIRMAN BURTON: Congratulations, Carl. 
MR. GUARDINO: Thank you, Senator. 
[Thereupon this portion of the 
Senate Rules Committee hearing 
was terminated at approximately. 
11:35 A.M. ] 

— 00O00— 



I, EVELYN J. MIZAK, a Shorthand Reporter of the State 
of California, do hereby certify: 

That I am a disinterested person herein; that the 
foregoing transcript of the Senate Rules Committee hearing was 
reported verbatim in shorthand by me, Evelyn J. Mizak, and 
thereafter transcribed into typewriting. 

I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

IN WITNESS WHEREOF, I have hereunto set my hand this 
day of :-. 21 -" '■<■ -" ! •: » 2003. 

^' v ><"'-i 

Shorthand Reporter 


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APR - 1 2&3 


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ROOM 113 


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Reported by: 

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Shorthand Reporter 










GREG SCHMIDT, Executive Officer 

PAT WEBB, Committee Secretary 

NETTIE SABELHAUS, Consultant on Governor's Appointments 






JAMES D. BOYD, Member 

State Energy Resources Conservation and Development Commission 


TAMERON B. MITCHELL, Chief Deputy Director 
Social Services Department 

JO WEBER, Assistant Director 
Department of Public Social Services 
County of Riverside 

JANE HENDERSON, Executive Director 

California Children & Families Commission (Prop. 10) 


California WIC Association 




Proceedings 1 

Governor ' s Appointees : 

JAMES D. BOYD, Member 

State Energy Resources Conservation and 

Development Commission 1 

Introduction and Support by 


Background and Experience 2 

Goals and Critical Issues 3 

Questions by CHAIRMAN BURTON re: 

Responsibility for Television Ads 

Re : Saving Energy 5 

Governor's Phase-Out of MTBE in Gasoline 5 

Motion to Confirm 7 

Committee Action 7 

TAMERON B. MITCHELL, Chief Deputy Director 

Department of Social Services 7 

Background and Experience 7 

Questions by CHAIRMAN BURTON re: 

Impact of Reducing Provider Payments on 

MediCal Patients 9 

Budget Proposal to Eliminate Annual 

Inspections of Community Care Facilities 11 

Possibility of Backlogs in Determining 

SSI-SSP Eligibility 13 


Questions by SENATOR ROMERO re: 

Moratorium on Waiver Requests for 

Those with Criminal Backgrounds 14 

Questions by SENATOR KARNETTE re: 

Budget Flexibility 15 

Witnesses in Support : 

JO WEBER, Assistant Director 

Department of Public Social Services 

County of Riverside 16 

JANE HENDERSON, Executive Director 

California Children and Families Commission 17 


California WIC Association 18 

Motion to Confirm 18 

Committee Action 19 

Termination of Proceedings 19 

Certificate of Reporter 20 

CHAIRMAN BURTON: James Boyd, State Energy 


Senator Sher. 

SENATOR SHER: Mr. Chairman and Members of the 
Committee, I have the pleasure to appear before you to introduce 
Mr. Jim Boyd. Mr. Boyd, a native Californian, is before you 
today for confirmation as a member of the State Energy Resources 
Conservation and Development Commission. 

I've known Jim Boyd for many years. I first came 
to know him when he was the Chief Executive Officer of the 
California Air Resources Board, an agency with which I have 
considerable contact. He served 15 years in that position, and 
during his tenure there, the Air Resources Board led the nation 
in establishing new and innovative pollution control programs 
for motor vehicles and their fuels. 

In 1998, Mr. Boyd moved to become the Assistant 
Director for the California Department of Fish and Game. Then 
in 1999, he was appointed energy adviser to the California 
Resources Agency Secretary. 

Recently Jim was appointed to the Energy 
Commission. In his work at the Energy Commission thus far, he's 
been an active supporter of promoting renewable energy resources 
to help address the state's energy needs. He has been involved 
in helping to address climate registry problems in the state, 
and has generally been a supporter of sensible and effective 
environmental protections for California. 

Therefore, I would urge the Committee to give 
Mr. Boyd your favorable consideration. 

CHAIRMAN BURTON: Thank you, Senator. 

Mr. Boyd. 

MR. BOYD: Thank you Chairman Burton. 

Mr. Chairman and Members, I want to thank Senator 
Burton for graciously — Senator Sher, my good friend, for 
graciously introducing me today. 

[Laughter. ] 

MR. BOYD: I guess I just lost that friendship. 
I was going to thank him for his years of dedicated service in 
energy legislation and environmental legislation, but I'll save 
that for another time. 

I'm very appreciative of the opportunity to 
address you here briefly today on my candidacy for the 
Commission, which we say in shorthand, the California Energy 
Commission rather than repeat that long title. 

But first, I would like to introduce you to the 
members of my family who are present today. My wife Kathy and 
my daughters, Lisa Piers and Amy Boyd, are sitting here in the 
front row. I thank them for coming. 

My son Paul was unable to be here today. He 
lives in San Francisco, and like many others at this time, he's 
trying to keep his investment firm moving forward. I encouraged 
him to do that and don't ask dad for money in the future. 

In any event, as you've seen from my resume, I've 
devoted most of my working life to public service. As Senator 
Sher indicated, a native Californian and a fourth generation 

Calif ornian. My mother's family goes deep into the Bay Area 
over many years. 

It's been particularly rewarding for me to 
contribute to the progress of the Golden State in a host of 
positions. If confirmed to this position, I hope and look 
forward to continuing to serve, as I say, my native state. 

I think it's fairly true that energy fuels the 
engines that move the California economy forward. As I 
indicated in my statement of goals that was requested by this 
committee, there is an abundance of issues that need to be 
addressed. In other words, plenty of work for me to do if we're 
going to meet California's energy needs for the future. 

Many agencies and many people are working to sort 
out the lessons learned from electricity problems that beset our 
state. Adequate electricity system infrastructure, that is 
generation, transmission and distribution facilities need to be 
provided. Adequate safeguards need to be provided to assure 
that just and reasonable rates are in place to protect 
California consumers. 

In particular, I feel we need to devise and 
implement efficiency and demand management programs to minimize 
the need for costly infrastructure additions. The CEC has very 
aggressive programs in both these areas and is further working 
in what I believe is a precedent setting manner with both the 
PUC and the Power Authority on demand management programs for 
California . 

And for energy security, we need to diversify our 
portfolio of energy generation with renewable generation, which 

is something that's been near and dear to my heart for a long 
time. Our new portfolio standards legislation will go a long 
way in helping us address that need. 

I will continue to work with others to assure 
that our demands for a cleaner burning natural gas is met by 
adequate supplies coming to California, and that we maximize our 
use of our own domestic California supplies, and that we have, 
again, adequate infrastructure in the state to deliver these 
supplies . 

Finally, the state's need for transportation 
fuels remains a major issue that will be with us for some time. 
We see a lot about price spikes in the paper, but there are many 
deep-seated issues that need to be addressed. Assuring adequate 
supply, addressing the need for demand reduction through 
efficiency measures, somewhat unique in transportation, and 
addressing energy security through maybe supply diversity, are 
issues that we have got to confront. 

And also the fact that California, unlike most of 
the world, it's the transportation sector that contributes most 
to the greenhouse gas emissions, that we have to deal with that 
issue. It needs to be addressed. 

I'm confident that my many years with 
transportation programs and issues related to transportation, 
both in air quality and other positions I've held, will indeed 
aid me in seeking resolution to these problems. 

Finally, I think reinstating the Energy 
Commission's historic role of energy data collection and 
analysis, and long-term energy forecasting is critical to 

California and our economic future, as we discovered, sadly, 
during the electricity crisis. SB 1389 by Senator Bowen, which 
was passed by you last year, requiring the preparation of an 
Integrated Energy Policy Report and that one be submitted every 
two years to the Legislature, I think, is the key point and was 
critical to addressing the need in this arena. I look forward 
to contributing to that product. 

I thank you very much for your time and 

CHAIRMAN BURTON: Is the Energy Commission the 
one that spends the money on those ads, like, "Save energy, " or 
"Turn off the light when you leave the room?" Who is that? 

MR. BOYD: For the past year, actually the 
Department of Consumer Affairs — 

CHAIRMAN BURTON: Do you know how much they 

MR. BOYD: No, I actually don't. But I can find 
that out . 

CHAIRMAN BURTON: We ought to find that out. I 
think it's a hell of an idea. But also I just wonder how much 
money they're spending, and whether it could be better used. 

I was reading the thing about the MTBE. And the 
Governor ordered a phase-out. Then, citing escalating fuel 
prices, he reset the deadline from basically a year. Then, as 
I'm reading a document that we have, that the gasoline with 
ethanol is cheaper than the gasoline with MTBE. 

So, do you have any concept of what he was 
talking about? If you don't, it's all right too. 

MR. BOYD: I'm very familiar with this issue of 

I'm not familiar with the fact that gasoline with 
ethanol will be any cheaper than with MTBE. 

CHAIRMAN BURTON: Well, it says, "... stations 
that sell MTBE-free gasoline are likely to have a competitive 
edge . " 

A lot of them, in fact, I was down in L.A., and I 
mean, like, they're advertising it, and the price was down. 

MR. BOYD: Well, gasoline made with ethanol will 
cost a little bit more than gasoline with MTBE. The 
infrastructure to do that is more complex and — 

CHAIRMAN BURTON: Once the infrastructure's in 

MR. BOYD: Well, it's requiring a change in 
infrastructure, and there may be added costs. But I do notice 
that those companies that have all ready converted are still 
competitive with the stations that sell just MTBE gasoline. 

CHAIRMAN BURTON: Senator Johnson. 

SENATOR JOHNSON: No questions. 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: No questions. 

CHAIRMAN BURTON: Senator Knight. 

SENATOR KNIGHT: No questions. 

CHAIRMAN BURTON: Senator Karnette. 

SENATOR KARNETTE: No questions. We went over 
everything . 

CHAIRMAN BURTON: Witnesses in support? 

Witnesses in opposition? 

Move the nomination. 

SECRETARY WEBB: Senator Karnette. 



Karnette Aye. Senator Knight. 


Knight Aye. Senator Romero. 

Senator Johnson. 

Romero Aye 


SECRETARY WEBB: Johnson Aye. Senator Burton. 


SECRETARY WEBB: Burton Aye. Five to zero. 

CHAIRMAN BURTON: Congratulations. 

MR. BOYD: Thank you very much, Senators. 

CHAIRMAN BURTON: Tameron Mitchell, Chief Deputy 
Director, Social Services. 

Go ahead, ma'am. 

MS. MITCHELL: Good afternoon, Mr. Chairman and 
Members of the Senate Rules Committee. My name is Tameron 

I appreciate the opportunity to appear before you 
today in seeking your concurrence in my nomination to serve as 
the Chief Deputy Director of the State Department of Social 
Services. It's an honor to be selected for this position by the 
Governor . 

I oversee a number of programs in the Department 
of Social Services, including Community Care Licensing, which 


licenses thousands of facilities that provide care for child 
care centers, foster homes, and facilities that care for the 

In addition, I oversee programs that serve the 
aged, blind, and disabled to help them to live independently and 
with dignity, such as the In-Home Supportive Services program 
and the SSI-SSP program, as well as the Adult Protective 
Services program. 

It's indeed a privilege to serve in the 
Department of Social Services, to aid in achieving our mission 
to serve, aid and protect vulnerable children, adults and other 
vulnerable populations in ways that strengthen and preserve 
families, encourage personal responsibility, and foster 

I am also a native Californian. I bring to this 
position over 27 years of proven administrative ability to 
administer health and social services programs at both the state 
and the county level. For the past 23 years, I've had the 
privilege to serve in California state service. I was 
previously at the Department of Health Services for a number of 
years and led a number of major initiatives in maternal and 
child health, primary care, teen pregnancy prevention, and 
public health nutrition programs such as WIC. 

I have always strived to be accountable, open, 
and responsive, to seek collaborative approaches to solving 
problems. I have worked closely with many of your staff in 
implementing and developing these initiatives. 

In the Department of Social Services, I apply my 

strong health background to approach complex issues with an eye 
towards integration and coordination in breaking down barriers 
across programs. 

I've submitted my resume to you and a description 
of my primary goals for the Department. These goals emphasize 
removing barriers to independence in our programs that assist 
the aged, blind, and disabled, and assuring that there are 
strong health and safety protections for the 1.4 million people, 
Californians, who are served in over 85,000 community care 
facilities that are licensed by the Department that provide care 
for foster children, the elderly, the disabled, and families who 
depend on child care. 

I have enjoyed the opportunity to meet with most 
of you or your staff recently to discuss your issues of primary 
concern and interest. I'll be happy, of course, to answer any 
questions, and I thank you for your consideration. 

CHAIRMAN BURTON: There was a question dealing 
with when you were with Health Services that actually, in a way, 
spills over to this because most of the people on SSI-SSP, 
probably all of them, are on MediCal. 

Given the administration's request to reduce 
provider payments, what kind of impact do you think that's going 
to have on the ability to find providers who are willing to care 
for MediCal patients? Do you see that being a potential 

MS. MITCHELL: Well, just — the main point, 
Senator, is that all of the choices that were -- 

CHAIRMAN BURTON: It's just a simple question. I 


know all the choices were tough. 

The question is, and I think the question answers 
itself, but it's going to be difficult to find providers. Let's 
assume that that's the answer. 

Then, do you have or can you think of any idea as 
to how we're going to be able to figure out a way to care for 
these people without dumping them on the counties? 

MS. MITCHELL: Well, certainly the SSI-SSP 
population is extremely vulnerable. The In-Home Supportive 
Services program, there will still be those services available 
to that population for their medical needs. 

CHAIRMAN BURTON: That's not going to help them 
if they've got high blood pressure. 

MS. MITCHELL: That's true. 

CHAIRMAN BURTON: We're not talking about IHSS 
people. I don't want to be argumentative about it. I mean, you 
know what I'm talking about. I know you want to defend the 
administration, make believe we're just having a discussion 
here, because we're wondering how it's going to, you know, how 
we're going to find doctors. It's tough to find them now. How 
are we going to find them in the future? 

I know or I read that at the national level, that 
the Bush administration is going to be reducing payments to 
Medicare providers. 

Has anybody ever given any thought to figure out 
how to kind of make this thing work, so to speak? Do you have 
any ideas on that, even though it's not what you're doing now, 
but it affects the clients that are under you. 


MS. MITCHELL: It certainly does. There is a lot 
of cross-over between the departments, and we'll work with the 
Department of Health Services. 

We hope that -- and we'll do everything we can to 
try to assure that, through provider outreach, and to try to 
ensure that there's coverage. 

Will there be an impact? There may be. It's 
always -- it's very difficult to cut rates to providers. You're 
always very concerned about access of people who need medical 
care . 

CHAIRMAN BURTON: The question is, do you know 
whether or not there's even a task force where somebody's trying 
to figure out, if there's just a certain amount of money in a 
pot for provider fees, how they can feed the multitude on three 
fish and two loaves, or whatever? Because I think that's 
something that we're going to have to deal with. 

I think it would be helpful if the people that 
are much smarter than us in the Department might figure a way, 
that's all. Because it's going to be tough in outreach, unless 
you're reaching out to find doctors that are willing to go broke 
taking care of the poor. I don't know how that's going to do 

The budget proposes to put an end to the annual 
inspection of community care facilities, which would be child 
care facilities, residential settings, and adult senior 
care . 

You know, we tend to find that there's an awful 
lot of violations with inspections. 


What are they going to go to, self-certification 
or what? How are they going to make that work? 

MS. MITCHELL: What we're proposing to do is to 
target our visits. So, for facilities — to all facilities, 
facilities that need to be visited every year, for example, 
facilities that are new, newly licensed, facilities who have had 
complaints made against them, or we've investigated and found a 
problem, facilities that are on probation because of prior poor 
performance, things like that, we will visit those facilities 
annually and continue to inspect those facilities. And that 
will be about 10 percent of all the 85,000 facilities that we 
license . 

And then for the others, we'll do a targeted — 
we'll do a random sample, where we'll do an unannounced visit of 
a random sample of about 10 percent of the facilities. 

None of those facilities will know when we're 
coming, how frequently we're coming. So, they'll know we'll be 
there, they just won't know when. 

So, we will continue to visit. 

CHAIRMAN BURTON: At the present, like, they know 
when you're coming? 

MS. MITCHELL: They don't now, but since we visit 
most facilities annually, they may have an idea as to when we 
may be back. If we've been back one year at a certain time, 
they may have a sense we'll be back about the same — 

CHAIRMAN BURTON: So they'll know when to change 
the sheets, or whatever. 

MS. MITCHELL: In this way, we will continue to 



And any time there's a complaint, we will be out 
within 10 days to look at that. 

CHAIRMAN BURTON: Would the cutbacks at the state 
level and cutbacks at the county level, probably eligibility 
workers and things of this sort, is there going to be any 
backlog in determining SSI-SSP eligibility and benefits? How's 
that going to work? 

MS. MITCHELL: I don't anticipate there'll be any 
backlog in SSI-SSP eligibility, sir. I don't believe that the 
budget reduction would affect that. 

The disability eligibility is done also in our 
department . 

CHAIRMAN BURTON: Aren't you going to have 

MS. MITCHELL: Those positions are funded with 
federal funds, and that's a large number of the positions in our 
department. And I don't foresee that that will be affected by 
this proposal. 

CHAIRMAN BURTON: Has somebody been looking at 
the federal budget to see that that money's going to be there? 

MS. MITCHELL: As far as we know, that's not — 
that's not an issue. 

about child care in particular 

Senator Johnson. 
No questions. 
Senator Romero. 
I have a couple, just questions 


Can you let us know about the Department, whether 
or not the Department is now reviewing the requests for a waiver 
to work in a child care facility, or are all of these basically 
still being dismissed? 

MS. MITCHELL: The waiver for — 

SENATOR ROMERO: We're talking about those with a 
criminal background. 

MS. MITCHELL: Oh, the criminal background. 

Yes, currently there is a moratorium on approving 
requests for anyone who has any sort of a criminal background. 
We're not approving those at this time. There is a moratorium 
that is currently under way. 

Anybody who doesn't have a criminal background, 
of course, is going to work in facilities. 

Those that have criminal backgrounds that aren't 
of a violent nature or a potentially violent nature are allowed 
to go ahead -- they are allowed to go ahead and continue working 
in the facility during the moratorium. So, they're not being 
excluded from the facility while the moratorium is under effect. 

SENATOR ROMERO: So, the moratorium is on those 
who would have a violent criminal offense as opposed to maybe 
something like a drunk driving arrest? 

MS. MITCHELL: Something like that, or petty 
theft, or something that doesn't involve violence. 

The Department, when anyone goes to work in a 
facility, in a child care facility, their finger prints are 
submitted to the Department of Justice, also to the FBI, as well 
as it's checked against the Child Abuse Index. 


Anybody who has a record in those files, in order 
to work in a child care facility they must get an exemption from 
the Department. And we look at the background and evaluate 
whether that person may pose risk of health and safety. 

SENATOR ROMERO: How long do you anticipate the 
moratorium will continue? 

MS. MITCHELL: The moratorium is in effect while 
the Department is reviewing its processes. The Governor asked 
us to look at all of our policies and procedures for reviewing 
criminal records, and that is underway. 

So, as soon as those recommendations have been 
reviewed by the administration, we will be then prepared to make 
those changes and lift the moratorium that's in effect right 


CHAIRMAN BURTON: Senator Knight. 

SENATOR KNIGHT: No questions. 

CHAIRMAN BURTON: Senator Karnette. 

SENATOR KARNETTE: Is it possible to have 
flexibility in your budgets? 

For example, if you had some money left over from 
the federal government, which probably wouldn't happen, but if 
you did, can you use it in some other way? 

And if you know you have money now, can you use 
that money and later refill the hole that you've taken it from? 

MS. MITCHELL: In some programs we can, such as 
in CalWORKS, the funds can be rolled over. It depends on the 
program. So, some programs yes, some programs no. 


Some programs where they can be, we of course do 
that, and then use the funds for those purposes in the coming 
year. So then, it reduces the need for funds in the future. 

SENATOR KARNETTE: Are there some that you need 
to be able to use that you can't now? Maybe we could help. 

MS. MITCHELL: That's an interesting question. 

I don't know of anything offhand, but it's 
certainly something I'll go back and check in the Department. 
But there's nothing that -- any major problems that that's 
causing us at the current time. 

SENATOR KARNETTE: Well, what I'm concerned about 
is that we're letting any money lie fallow that we aren't using 
right now that we could be. That's really what I'm getting at. 

MS. MITCHELL: Unfortunately, I don't think so. 
Where there are opportunities to do that, we maximize those 
opportunities . 


CHAIRMAN BURTON: Did you have any family 



MS. MITCHELL: Yes, I do. Thank you for the 

I'd like to recognize my parents, Don and Laurie 
Brink, and also my husband, David Mitchell. 

CHAIRMAN BURTON: Witnesses in support. 

MS. WEBER: Thank you, Mr. Chair. I sympathize 
with your illness. 

I'm Jo Weber, Assistant Director with the 
Riverside County Department of Public Social Services. 


I have known and worked with Ms. Mitchell for 
five years, and I've always found her to be fair-minded and 
educated about the issues and influences concerning our 
programs, and concerned about the welfare of those that we serve 
in the field of human services. 

Through her influence on state policy, she's 
shown great compassion and respect and generosity for the 
vulnerable citizens of our state. 

I strongly support her confirmation as Chief 
Deputy Director. 

MS. HENDERSON: Good afternoon, Mr. Chairman and 

I'm Jane Henderson, Executive Director of the 
California Children and Families Commission, otherwise known as 
Prop. 10. 

And I also am here in support of Tameron 
Mitchell. I have worked with Tarn and known her for well over 
ten years. We have focused on creating better state level 
collaboration among state agencies and building partnerships 
with private foundations. 

I have a very high regard for her work, her 
organizational capacity, her ability to get the work done. 
She's honest, she's forthright, she takes initiative. She's 
responsive . 

We have a number of programs that we are 
implementing in conjunction with the Department of Social 
Services, and Ms. Mitchell's leadership will assist us in 
continuing that state level partnership. 

I encourage her appointment. 

Thank you. 

MS. TRUE: Mr. Chairman and Members, Laurie 
True, California WIC Association. 

I guess I've known Tameron the longest, 15 years 
or so, probably more; I've lost count, because I've been a 
long-time hunger and WIC advocate, and she started out in the 
WIC program at the Department of Health Services, even at the 
county, in Tulare County. 

She's unflappable. She's dedicated, she's 
committed. She's very articulate. She implements, you know, 
her boss's vision. 

I'm not sure I really envy her position now 
because it's going to be a very tough year, but I'm glad to have 
her in the Department protecting, as well as she can, vulnerable 
and low-income families in California. 

Thank you. 

CHAIRMAN BURTON: Witnesses in opposition? 

I move the nomination. 

SECRETARY WEBB: Senator Karnette. 



Karnette Aye. Senator Knight 


Knight Aye. Senator Romero. 


Romero Aye. Senator Johnson. 
SECRETARY WEBB: Johnson Aye. Senator Burton. 



SECRETARY WEBB: Burton Aye. Five to zero. 

CHAIRMAN BURTON: Congratulations. 

MS. MITCHELL: Thank you. 

[Thereupon this portion of the 

Senate Rules Committee hearing 

was terminated at approximately. 

2:08 P.M.] 

--00O00 — 



I, EVELYN J. MIZAK, a Shorthand Reporter of the State 
of California, do hereby certify: 

That I am a disinterested person herein; that the 
foregoing transcript of the Senate Rules Committee hearing was 
reported verbatim in shorthand by me, Evelyn J. Mizak, and 
thereafter transcribed into typewriting. 

I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

IN WITNESS WHEREOF, I have hereunto set my hand this 
day of Ct^^v^-^-^^i ^ , 2003. 



Shorthand Reporter 

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GREG SCHMIDT, Executive Officer 

PAT WEBB, Committee Secretary 

NETTIE SABELHAUS, Consultant on Governor's Appointments 







California Independent System Operator Governing Board 


California Independent System Operator Governing Board 



Proceedings 1 

Governor ' s Appointees : 


California Independent System Operator Governing Board 1 

Background and Experience 1 

Questions by CHAIRMAN BURTON re: 

Vacancies on Board 2 

Funding for ISO 3 

Salaries or Payments to Board Members 5 

Election of President of Organization 5 

Two-Tier System 6 

Questions by SENATOR KARNETTE re: 

Possibility of FERC Refusing to 

Approve Charges Levied on Consumers 7 

FERC s Ability to Defund ISO 8 

Witness in Support : 


California Independent System Operator 

Governing Board 8 

Witness in Opposition: 


Questions by SENATOR JOHNSON re: 

Definition of "Senior Management" 12 

Role of Board' s Chair in Process 12 


Reason for Not Also Opposing 

Previous Appointees to Board 12 

Statements by SENATOR JOHNSON re: 

Unfair to Treat Nominee Differently 14 

Statements by CHAIRMAN BURTON re: 

Concerns about Staff of Board 15 

Concern about Issues Raised by 


Need to Fill Vacancies on Board 16 

Motion to Confirm 16 

Committee Action 17 

Termination of Proceedings 17 

Certificate of Reporter 18 


CHAIRMAN BURTON: Committee will be back in 
session. Michael Kahn, Member of the Independent System 
Operator Governing Board. 

Are you here as a member or Chair, or what? 

MR. KAHN: A member, sir. 

CHAIRMAN BURTON: Who is the Chair? 

MR. KAHN: I'm the Chair, but the Chair is 
elected by the members. I think it's also approved by the EOB 

CHAIRMAN BURTON: Is that between Powell and 




It's right across the street from 


MR. KAHN: Thank you, Mr. Chair. 

My name is Michael Kahn. 

CHAIRMAN BURTON: So you moved or what? Do you 
live on Powell or Jackson? 

MR. KAHN: I live on Powell. 

CHAIRMAN BURTON: Just checking. Go ahead. 

MR. KAHN: First of all I'd like to thank the 
Committee for arranging their schedule to accommodate mine. I 
really appreciate that. 

I've been the Chair of the ISO since January of 
2001. Prior to that time for a year I was the Chair of the 
Electricity Oversight Board. 

When I took over as the Chair of the ISO, we were 

in extreme crisis in January of 2001. We were threatened with 
blackouts on a daily basis. We had Stage Three virtually every 
day. The price of electricity when I took over as Chairman of 
the ISO was running at $70 billion dollars a year for what we 
paid 7 billion for in the past. In addition, we had -- our 
utilities were bankrupt and the Power Exchange was defunct. 

Today many of these problems are under control. 
The prices are dramatically lower, and for the foreseeable 
future, or at least for the immediate future, supply has been 

But there are significant structural problems in 
the electricity situation in California. We are still 
vulnerable to price spikes in the future. We are vulnerable to 
prices up to the price cap that has been raised to 250. We are 
vulnerable to supply manipulation. And finally, we face a 
governance crisis. 

There is much work to be done. We have to solve 
the structural issues and we have to solve the governance 
issues . 

Every day for the last two-and-a-half years, I 
have worked on the electricity crisis for California. It's been 
my privilege to do so. If it is your will, I will devote my 
time as ISO member and as Chair to solving the immediate 
governance issues, the structural issues, and to lead ISO out of 
its transition period into a more stable period. 

Thank you, Mr. Chair. 

CHAIRMAN BURTON: There's still two vacancies? 

MR. KAHN: Yes, sir. 

CHAIRMAN BURTON: Tal Finney resigned December 
2nd, and then Maria Contreras-Sweet . 

When did John Geesman retire? 

MR. KAHN: I think he resigned when he went to the 
Energy Commission, which was, I think, the middle of last year. 

CHAIRMAN BURTON: So they've been short one 
member for about seven months, and then Tal ' s slot for about two 
months . 

MR. KAHN: Something like that, yes. 

CHAIRMAN BURTON: The funding for ISO comes from 

MR. KAHN: The funding for ISO comes from the 
transmission charge on utility bills, which comes directly from 
the utility bills, and the rates that are charged are approved 
by FERC, the Federal Energy Regulatory Commission. 

There's a proceeding that occurs which sets the 
rates within FERC. 

replace the current Board with a new two tier governance 
structure, what would that have been? Right now it's a five 
member board with three members on it, appointed by the Governor 
and confirmed by the Senate. 

MR. KAHN: Yes, sir. 

CHAIRMAN BURTON: What is the two-tier solution? 

MR. KAHN: Well, FERC made two orders in 2000. 
In November, 2000, FERC abandoned the then-existing board and 
ordered that a new board be selected by head-hunter process that 
was going to be conducted by the old board. The Legislature -- 

CHAIRMAN BURTON: By what process? 

MR. KAHN: A process where they would use a 
head-hunter to select the candidates, and then the candidates 
would be chosen by FERC. 

CHAIRMAN BURTON: What about the July 17th deal? 

MR. KAHN: Then, when the Legislature and the 
Governor decided that that was unacceptable and appointed this 
board, five members, for one year. That went on, and FERC did 
nothing for a year-and-a-half . 

FERC this summer instructed the President of the 
Board — excuse me, the President of the organization, Terry 
Winter, to begin a process of selecting head-hunters to select a 
new board and a new structure. 

The Board instructed Mr. Winters -- 

CHAIRMAN BURTON: I'm trying to understand what 
the two-tier structure is. 

MR. KAHN: I don't fully understand the 
structure, except to say that it's fully — it's under FERC ' s 
control of who chooses who the Board members are, and they are 
chosen by a head-hunter process whereby the head-hunter selects 
people who have certain kinds of characteristics: energy 
experience, et cetera. 

And then those people are -- first the 
head-hunters are selected, and then the members are selected, 
and then FERC gets to decide whether to choose them or not. 

CHAIRMAN BURTON: So, they have head-hunters 
going around to find people that have jobs that don't pay money? 
I mean, they're nonpaying jobs, right? Do you get a per diem? 

MR. KAHN: The Chair is entitled to $20,000 a 

CHAIRMAN BURTON: How about anybody else? 

MR. KAHN: I think everybody else gets $500 a — 
I think everybody else gets 500 meeting. I think the Chair 
might also get 500 a meeting. I don't know how much the Chair 
or the individual gets. 

CHAIRMAN BURTON: Now, you mentioned somebody who 
was the President of the Commission? 

MR. KAHN: Right. The FERC had ordered the 
President of the organization, of ISO, who's Mr. Terry Winter, 
to take -- 

CHAIRMAN BURTON: How did he get elected? 

MR. KAHN: Mr. Winter was hired by the original 
ISO Board, I think, four or five years ago. He was one of the 
first -- 

CHAIRMAN BURTON: As President as opposed to like 
Executive Officer? 

MR. KAHN: No, he was selected as President. The 
organization works with -- it's a nonprofit benefit corporation, 
and the organization was set up by -- this was all before my 
time -- but it was set up by selecting a President, a Vice 
President, a General Counsel to mirror other corporations. And 
that's how it was set up, and Mr. Winter's had that job for many 
years, well before I got involved. 

But he was ordered to do things, to replace the 
Board, and the Board ordered him to not do any of those things, 
and he has complied with the Board. So, no steps have been 

taken to comply with FERC. 

CHAIRMAN BURTON: So, we don't know what the 
two-tier system is. Is it like a bicameral house or what? 

MR. KAHN: I don't really know, sir. The 
position of the State of California -- 

CHAIRMAN BURTON: Forget that. 

FERC directed — 

MR. KAHN: A new board. 

CHAIRMAN BURTON: — a two-tier governance 
structure. I'm just wondering what it would be. 

MR. KAHN: I don't really know. The position of 
the state was that FERC couldn't do that. 

CHAIRMAN BURTON: No, forget the position of the 
state . 

Didn't they send a letter? It's kind of idle 
curiosity. We're not at the guts of this hearing. It's sort of 
idle curiosity what a two-tiered governance system would be. 

MR. KAHN: Well, I think — I'm not sure if it 
was a two-tier governance system. All I know what it was, the 
key part of it was, was that the state would lose any role in 
it, and that was unacceptable. 

CHAIRMAN BURTON: May I ask a question? Who put 
this in my book? Where did this come from? 

I mean, I've got a document that I guess is 
irrelevant. It says on the 17th, 

"... FERC directed the ISO to 
replace the current board with 
a new two-tier governance 

structure . . . . " 

I was just kind of wondering what the hell it 
was. Anybody? 

MR. KAHN: A note that was passed to me, it says 
that they were going to have a stakeholder advisory committee. 
That was the two tiers. One tier was the stakeholder advisory 
committee, and the other was the board. 

CHAIRMAN BURTON: And the other one was the board 
that could listen or not to the advisory committee. 

MR. KAHN: Yes, sir. That's what they 

CHAIRMAN BURTON: Sounds good to me. 

Senator Johnson. 

SENATOR JOHNSON: No questions. 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: No questions. 

CHAIRMAN BURTON: Senator Knight. 

SENATOR KNIGHT: Heavens no. 

CHAIRMAN BURTON: Senator Karnette. 

SENATOR KARNETTE: I wanted to know what happens 
if FERC refuses to approve the charges that are being levied on 
the consumer that pays for the ISO? 

MR. KAHN: Actually FERC, I don't think they have 
a process for refusing to do it altogether. What they do is 
sort of a negotiation in which there's a proceeding in front of 
FERC. And the issue, they're setting the amount of the rate. 

So, it's not a matter of saying yes or no. It's 
a matter of saying whether it's too high or not high enough. 


And it's like a rate proceeding that we have in the PUC . It's a 
transmission charge proceeding which we have at FERC. So, they 
-- if they think it's too high, we can't charge it. 

And they review the budget of the ISO completely. 
The entire budget of the ISO is thoroughly reviewed by FERC in a 
FERC proceeding. 

SENATOR KARNETTE: So actually, they might even 
defund almost; they could. 

MR. KAHN: Well, I don't think they can defund it 
because they have a -- well, I guess they could, but statutorily 
they have an obligation to be sure that the ISO performs 
transmission services because they've taken it in their 

So, I don't think they could defund it, but they 
certainly could starve it. 

SENATOR KARNETTE: I don't know what that means 
now that I got an answer, but thank you. 

CHAIRMAN BURTON: Witnesses in support. 

Are you here in your capacity as a member of ISO, 
in your capacity as the Silicon Valley Group, or both? 

MR. GUARDINO: Thank you, Chairman Burton. I'm 
here solely in my capacity as a colleague on the California 
Independent System Operator Board of Governors. 

Thank you, Mr. Chair and Members. My name is 
Carl Guardino. Two weeks ago you were kind enough to reconfirm 
my appointment. Thank you again for that confidence. 

I'm here today in support of Michael Kahn ' s 
confirmation. During the past two years, Chairman Kahn has 

worked tirelessly to serve the consumers of the State of 

He is articulate, passionate, ethical, 
knowledgeable, and solely committed to protecting the ratepayers 
and taxpayers of California. I'm proud to serve with him, and 
respectfully urge you to confirm him today. 

Thank you very much. 

SENATOR JOHNSON: Does he work tirelessly really, 
or just diligently? 

MR. GUARDINO: I would say actually, Senator, 
both, yes. 

SENATOR JOHNSON: He ' s a better man than any of 

us . 


MR. GUARDINO: Thank you, Senator. 

CHAIRMAN BURTON: Did you have any family here? 


Witnesses in support? Witnesses for comments? 

Senator Dunn. 

SENATOR DUNN: Thank you, Senator Burton, fellow 
Members. I will be brief. 

I come before the Committee most respectfully but 
to oppose the confirmation. 

The comments you just heard from Carl I agree 
with one hundred percent. The thrust of my comments are not 
directed at Michael Kahn, because I do agree with all the 
comments that Carl and others have made about him. 

But rather, it's about senior management, 


management that is still in place.' And to quote former 
President Ronald Reagan, although I'll butcher the statement, 
senior management is not part of the solution; it is part of the 
problem as we try to solve California's energy crisis. 

Three main points about senior management. 

First, we have found in the Investigation 
Committee, and I know other policy committees in the Senate have 
found, senior management to be uncooperative, to say the least, 
with respect to many of our inquiries and our seeking of 

I do want to make a personal comment. Their 
General Counsel, Charlie Robinson, has been a great assistance 
in overcoming many of those oppositions or obstacles provided by 
senior management. But still, it's a day-to-day struggle with 
senior management, whether it's getting information on C66, or 
MD02, or any of the other critical issues. 

As most of you may be aware, senior management 
was quoted last week in the Sacramento Bee , I believe it was, 
reflecting not much of a respectful attitude towards the 
political process and us, quote, "politicians," end quote. 

Second, senior management cannot shed the events 
of December 8th, 2000. That is the event, that is the day, that 
the last remaining price caps were eliminated by FERC in 
response to senior management's emergency petition. 

That move by senior management was not only 
insubordination to the then-existing ISO Board which did not 
give him approval, and he did not ask, because he said in a 
sworn deposition he knew they wouldn't give him approval to do 


that. It also, in my humble view, constituted outright treason 
to the citizens of California, because it was the removal of 
those price caps on December 8th that thrust us into the depths 
of the energy crisis we found in December, January, February and 
on of 2001. 

Third, in my humble view this senior management 
is not capable of running the very complex grid that the ISO is 
charged the responsibility to do on a day-in and day-out basis, 
whether that's events like C66, or the inability to detect and 
attack phantom congestion, whether it's their handling of the 
Perot Systems problems whose roots have extended well into 
today's operation of the ISO, including things as far as the 
retention of their counsel in Washington, D.C. 

Most of you may not be aware, but our ISO has a 
Washington, D.C. office. It's in a law office, a law office by 
the name of Swidler Berlin. Swidler Berlin represents many of 
the energy participants throughout the nation and includes, we 
understand now, the upper management of Enron as a result of 
potential investigations. That is the same legal counsel that 
is representing our ISO on a variety of matters, particularly in 
its relationship to FERC. 

As I started my comments, my opposition is not 
about Michael Kahn. I believe Michael is everything Carl has 
said, and all my dealings with him have shown that to be true. 

But there comes a time when, if part of the 
problem is a troubled senior management, that senior management 
must be dealt with. 

My hope and prayer is that senior management will 


be dealt with. And until such time, I most respectfully oppose 

Thank you, Mr. Chair. 

CHAIRMAN BURTON: Senator Johnson. 


First of all, I'm a little unclear as to how 
you're defining senior management. You made some reference to 
counsel, but what in your mind is senior management? 

SENATOR DUNN: There are two individuals. I 
believe Mr. Kahn corrected it. I thought Mr. Winter was CEO, 
but apparently he's President of the ISO. 

He has one individual that serves very, very 
closely to him, who advises him. 

My criticism when I say senior management is 
directed at those two in particular. 

SENATOR JOHNSON: What is the role of the ISO 
Board or Chairman in that process? Is it something that's 
unilaterally within the purview of Mr. Kahn? 

SENATOR DUNN: It is my understanding that the 
management shall carry out the directives and policy decisions 
made by the ISO Board. They are completely responsive, as is 
traditional in an organization like that, to the Board itself, 
Senator Johnson. 

SENATOR JOHNSON: That leaves the next logical 
question, why are you here opposing this nominee and did not 
oppose the folks that we dealt with a couple of weeks ago, 
Mr. Guardino and Mr. Florio? 

SENATOR DUNN: Because it is my view that the 
Chairman of the Board is the best person to engage these 


discussions with, Mr. Johnson. 

SENATOR JOHNSON: Well, let's suppose that he was 
just absolutely in one hundred percent agreement with you. 


SENATOR JOHNSON: But these questions weren't 
raised of the folks we confirmed just a couple of weeks ago. 

So, I'm at a loss to follow the fairness of 
rejecting, or considering rejecting, this nominee when it wasn't 
even a part of the discussion with the earlier nominees. 

SENATOR DUNN: Yes. Senator Johnson, just for 
background, the discussions were already underway when 
Mr. Guardino and Mr. Florio were here to testify. 

SENATOR JOHNSON: They were all three scheduled 
to be heard at the same time, and it's my understanding that 
this nomination was put over at your request. 

SENATOR DUNN: Yes, sir. 

SENATOR JOHNSON: But you made no such request to 
put over the other two nominees, so I think my question is still 
a fair one. 

SENATOR JOHNSON: I'm not arguing, Senator 
Johnson. It's a fair one. 

And it was my hope at that time in direct 
dealings with Mr. Kahn and others that this ongoing issue of 
problems with senior management could be resolved prior to 
Mr. Kahn ' s confirmation today. 

We were unsuccessful in those endeavors, Senator 
Johnson . 

SENATOR JOHNSON: I'm still — let's try one more 



If it was reasonable, and you said there were 
ongoing discussions with Mr. Kahn, why didn't we put over at 
least until the drop-dead date, those -- 

SENATOR DUNN: I can answer that for you. 

At least from my perspective, Senator Johnson, I 
only requested Mr. Kahn's because it was my belief that we could 
resolve these concerns in direct discussions with Mr. Kahn. 

Had I guessed we'd be where we are today, I would 
have requested Mr. Florio's and Mr. Guardino's confirmations be 
put over as well. 

But you are correct, Senator Johnson, I agree. 
Fair question. 

SENATOR JOHNSON: Well, Mr. Chairman, I just feel 
that to focus in on one member of the Board, to say somehow he's 
responsible for questions or concerns that Senator Dunn may have 
about top management, I feel that would be unfair. 

And if I were the Governor, I don't know that I 
would have appointed any of these folks. 

But the fact is that the Governor does have the 
authority. We have an ability to evaluate that. We did that on 
the earlier two, and I see no real compelling difference to 
treat this gentleman any differently than the earlier ones. 

CHAIRMAN BURTON: He is, in point of fact, a 
constituent of mine. 

SENATOR JOHNSON: Hence the need to know that 
precise distinction. 

CHAIRMAN BURTON: If he was a Jackie Speier, we 


could take another look at this whole issue. 

It concerns me, because I'm one of those that 
believe that staff work for the commissions, and commissions 
don't work for the staff, even if the commissions are 
part-time . 

It would concern me, and it concerns me greatly, 
if in fact staff goes off on their own, on frolics of their own, 
I might add, to make decisions without, one, notifying the 
Board, and if they're contrary to the Board's policy, not 
notifying them intentionally. 

I just hope that that doesn't happen. 

The other thing that concerns me is that when the 
President of ISO comes before Senate committees and kind of 
stonewalls them, I don't like that. 

And this guy's supposed to be a very bright and 
intelligent man. And not to know and not to remember, I mean, 
it sounds like somebody appearing before a grand jury that 
doesn't want to invoke the Fifth, and doesn't want to commit 
perjury. So therefore, "Well, I don't really remember," and 
"That's not clear. It's not clear in my mind. I really can't 
say that. I don't remember." 

And so, we don't like that stuff. And if the day 
ever comes, and I kind of hope it doesn't, but if he ever 
appears, or anybody whether it's ISO or anyone else that appears 
before this Committee, and we're trying to get information, and 
they give us the "I don't know; I can't remember," we'll 
probably not remember to send them a paycheck. 

But I appreciate Senator Dunn's concern. I think 


that I've known Mr. Kahn since the inception, almost, of the 
energy crisis brought on by AB 1890, Brulte. 

SENATOR JOHNSON: How were you recorded, 
Mr. Chair? 

CHAIRMAN BURTON: Not voting, thank you. I was 
out of the room. 

Anyway, we're very concerned about issues that 
were raised by Senator Dunn. I'm just always very concerned 
that staff people take the bit into their own hands. 

I would think also that it is very important for 
you to inform the Governor of those two vacancies and get the 
commission up to snuff. I don't know whether they can bring Tal 
Finney back again. He's been up and down for more cups of 
coffee than his old Pacific Coast League baseball players. 

But we need people there. I think that Irwin 
Nowick, according to the Sacramento Bee , is available. I think 
if you could make him, if he could be a Board member, and maybe 
he had responsibility for the oversight of that senior staff, we 
would see some real changes. 

SENATOR JOHNSON: Golden parachutes. 

CHAIRMAN BURTON: Anyway, I'll move the 



SECRETARY WEBB: Senator Karnette. Senator 


SECRETARY WEBB: Knight Aye. Senator Romero. 


SECRETARY WEBB: Romero Aye. Senator Johnson. 



SECRETARY WEBB: Johnson Aye. Senator Burton. 

SECRETARY WEBB: Burton Aye. Four to zero. 
CHAIRMAN BURTON: Congratulations, Michael. 
MR. KAHN: Thank you. 
[Thereupon this portion of the 
Senate Rules Committee hearing 
was terminated at approximately 
11:07 A.M. ] 

— 00O00 — 



I, EVELYN J. MIZAK, a Shorthand Reporter of the State 
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o!/0 day of /£~n i^t'L-^ , 2003. 

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APR - 1 2003 



ROOM 113 


10:05 A.M. 





ROOM 113 


10:05 A.M. 

Reported by: 

Evelyn J. Mizak 
Shorthand Reporter 










GREG SCHMIDT, Executive Officer 

PAT WEBB, Committee Secretary 

NETTIE SABELHAUS, Consultant on Governor's Appointments 






Board of Prison Terms 

MARVIN E. SPEED II, Executive Officer 
Board of Prison Terms 




Proceedings 1 

Governor ' s Appointee : 


Board of Prison Terms 1 

Opening Statement 1 

Questions by CHAIRMAN BURTON re: 

Reaction to Inspector General' s Report 2 

Number of Deputy Commissioners Needed 3 

Parole Revocations 3 

Steps Taken to Increase Supervision of 

Deputy Commissioners 4 

Battered Woman' s Syndrome Cases 5 

Contracting Out for Psych Evaluations 6 

Computer Technology Situation 7 

Questions by SENATOR ROMERO re: 

Implementation of Tracking System 9 

Response by MARVIN SPEED 

Executive Officer 

Board of Prison Terms 9 

Establishment of Parole Policy 11 

Request by CHAIRMAN BURTON re: 

Number of Technical Violations, Length of 

Time Served, and Cost 13 

Response by MR. SPEED 14 


Motion to Confirm 15 

Committee Action . . 16 

Termination of Proceedings 16 

Certificate of Reporter 17 

— 00O00-- ' 

CHAIRMAN BURTON: Al Angele, Member, Board of 
Prison Terms. 

Go ahead. 

MR. ANGELE: Chairman Burton, Vice Chairman 
Johnson, Members of the Committee, Senators Karnette, Knight, 
and Romero. 

During the past three years as I've served as a 
Commissioner on the Board Prison Terms, I've seen many positive 
changes, from the appointment of Commissioner Carol Daly as 
Chair, and her subsequent appointment of Marvin Speed, a Deputy 
Commissioner, Marvin Speed as Executive Officer, significant 
progress has been made. 

Do we have problems? Yes, we still have 
problems; however, genuine attempts are being made to resolve 
those problems and the related issues. 

During my term as a Commissioner, I've 
participated in over 2,000 lifer hearings. I also participated 
in documentation hearings, recission hearings, and progress 
hearings . 

I come before you today to seek your support in 
order that I may continue to perform my duties along with the 
team of professionals dedicated to the goal of the BPT, which is 
preserving public safety. 


The Inspector General issued a report on the 
Board of Prison Terms, particularly parole revocation process. 

Are you familiar with that report? 


CHAIRMAN BURTON: I know you basically deal with 
lifer hearings, but can you tell us you are reaction to the 
report generally? 

And then, the IG thinks you could do the work 
with 39 deputy commissioners instead of — there's 85 
authorized. Do you know how many you have of the 85? 

MR. ANGELE: No, I'm not sure. 

CHAIRMAN BURTON: Do you know that, Nettie? 

MS. SABELHAUS: Around 70. 

MR. SPEED [FROM THE AUDIENCE]: There's 62 right 


CHAIRMAN BURTON: So, there's 62 here now, okay. 


CHAIRMAN BURTON: Thank you. That answers that 


Do you want to give your reaction -- 

MR. ANGELE: Sure. 

CHAIRMAN BURTON: -- to the report? 

MR. ANGELE: Number one, the IG's report speaks 
about having the revocation process sent to CDC. However, in 
1992 and 1994 it was in the hands of CDC. That was under the 
regime of Chairman John Gillis. 

Under Nielsen, it came back to the Board of 
Prison Terms due to lawsuits being filed relative to conflict of 
interest problems. That would be Cervantes then later on 
Valdivia . 

1 The number of deputy commissioners needed, 

2 obviously, has to do with the time it takes to perform the 

3 task. And as I understand it, the numbers used as far as ours 

4 had to do with some of the quicker deputy commissioners, instead 

5 of taking a broad spectrum of the approximate times and 

6 averaging those out. 

7 I think if there's going to be an attempt to move 

8 revisions to CDC, there' d best be some investigations done to 

9 ensure that we don't have the same problem as we had with 

10 Valdivia , which, of course, is still pending. That could turn 

11 the whole thing upside down. 

12 CHAIRMAN BURTON: Do you know why they said there 

13 was a conflict? 

14 MR. ANGELE: Yes. Basically, we had the same 

15 individuals putting the individuals who were violating the 

16 parolee making the decisions on how long they should be put back 

17 in custody. 

18 The terms of the custody is governed by Title 15 

19 due to specific -- or, I should say, pertaining to specific 

20 crimes. It tells you how long they're going to go back into 

21 custody. As a matter of Cervantes in the first place, it was a 

22 lawsuit that had to do with the total revocation process, which 

23 included the conflict of interest issue. 

24 CHAIRMAN BURTON: There's parole revocations for 

25 crimes and parole revocations for technicalities; right? 

26 Technical parole violations? 

27 MR. ANGELE: Yes, correct. 

28 CHAIRMAN BURTON: Would you have any idea of the 



numbers or the percentage? 

MR. ANGELE: I don't have the numbers on what is 

I do know that the deputy commissioners do have 
the ability to unfound a case and not necessarily violate 

It comes to our attention once they've been 
violated by their parole officer, and they can either be in 
custody or not in custody. 

CHAIRMAN BURTON: Well, one of the concerns that 
we have as we're going through the budget is, there's an awful 
lot of technical parole violations, where people are going back 
into state prison for very short time spans, which costs a whole 
lot of money because they're going all through the process 
again, much less the time they're there. But I mean, they were 
revoking people, as I understand at some point, you know, 
sending people back three and four months, which doesn't make a 
hell of a lot of sense to me. 

If somebody on parole commits a crime, and it's a 
crime-crime, then go for it and let the DAs and the counties do 
the job, prosecute them. If the jury finds them guilty, put 
them back in for whatever the thing is. 

Are there any steps to increase supervision of 
the deputy commissioners? 

MR. ANGELE: As a matter of fact, the Executive 
Officer has taken steps. They now are required to fill out, 
shall we say, tracking forms to show where they are, and what 
they're doing, and the time it takes them to do it. 

Also, there's been an increase in the number of 
associate chief deputy commissioners who now are going to be put 
into the field to help supervise. 

CHAIRMAN BURTON: Deputy commissioners, how are 
they picked? 

MR. ANGELE: Presently they have to go by Civil 
Service. That was a change made — 

CHAIRMAN BURTON: Who were the ones I remember 
when Jim Nielsen got stiffed on the Board, he got a job doing 

MS. SABELHAUS: He was a deputy commissioner. 

CHAIRMAN BURTON: How'd he get that? He wasn't 
civil servant. 

MR. ANGELE: He was appointed. 


MR. ANGELE: I believe that was during the 
Hepburn regime. 

CHAIRMAN BURTON: Well, then, they don't have to 
be Civil Service. 

MR. ANGELE: They do now. Commissioner Daly 
changed it. 

CHAIRMAN BURTON: So now they have to, but then 
they didn't? 

MR. ANGELE: That is correct. 

CHAIRMAN BURTON: Do you see any improvement in 
investigating the Battered Women Syndrome cases since you've 
been on the Board? More attention being paid to it, so to 

MR. ANGELE: There's a lot more attention being 
paid to it. We're receiving reports from the Investigation 
Division. The reports are extremely complete; outstanding work 
that they're doing at Division, and it's very, very helpful. 

CHAIRMAN BURTON: I guess people get, you know, 
either classes in it or educated? In other words, when they go 
in to look at the Battered Women Syndrome, before they do that, 
they get continuing-education-of-the-bar thing, whatever it is? 
I guess classes on it, or they're instructed in the issues so 
they know what it is? 

MR. ANGELE: Are you speaking of the 


MR. ANGELE: We do have training on the issue. 
And, of course, a lot of us also purchase books on the issue to 
keep ourselves up on the studies that are being done. 

CHAIRMAN BURTON: Are you of the opinion that the 
psychological evaluation of lifers should be contracted out 
instead of — 

MR. ANGELE: Without a doubt, yes. 


MR. ANGELE: We have a situation where you have a 
psychologist or psychiatrist -- 

CHAIRMAN BURTON: Basically conflict? 

MR. ANGELE: In a way. He is the same -- he or 
she is the same individual who's going to give an evaluation of 
the subject, who he may be giving on and on self-help therapy 

We have found in my experience that you get a 
better product by somebody who is on the outside who don't have 
to interact with the inmate. I think they are more apt to be 
hard-line specific instead of kind of brushing the edges. 

And the product that I see, regardless of 
whether or not they're going to be under the control of CDC or 
BPT, I think it ' s a better product. And I've talked to enough 
psychiatrists -- 

CHAIRMAN BURTON: When you say hard-line, in 
other words, the person treating them would be more kindly 
disposed to them than an outsider, or they would really know 
better whether the person — 

MR. ANGELE: Well, my point is, if they give an 
inmate a bad evaluation, they're now in a situation of having to 
be with that inmate during therapy. That could cause a little 
bit of a problem. 

And also, in talking to enough psychologists who 
are outside clinicians, they also agree with the same theory. 

CHAIRMAN BURTON: Do you have any thoughts on BPT 
and CDC's computer technology situation that handles the parole 
revocation process? 

MR. ANGELE: You mean RSTS? 

CHAIRMAN BURTON: I guess so. I don't know. 

MR. ANGELE: There are two issues. 

CHAIRMAN BURTON: It doesn't make sense to me, 
but I thought that you -- 

MR. ANGELE: It doesn't make much sense to me, 
neither, but I think I know where we're going. 


If we're talking about RSTS, this is the 
inputting of data into a computer during the time of the 

Unless we're talking about tracking lifers and 
when their dates are coming up. There's two different issues 

CHAIRMAN BURTON: What do you think, just 
generally, of the computer — 

MR. ANGELE: Well, you know, back about ten years 
ago, the BPT had their own computer system to be able to track 
when the next lifer was coming up, and that went over to CDC. 
And BPT then had to rely on CDC to put people on a list so 
they'd have their hearings on time. And as a result, we wound 
up having a lot of late people. 

We're now in the process of developing the 
management information system which gives us the ability, based 
upon the input from CDC, to stay on top of who and where these 
hearings have to go next, which assists us greatly in making 
sure nobody falls through the holes. 


Senator Johnson. 
No questions. 
Senator Romero. 
SENATOR ROMERO: Actually, I want to follow up on 
that question. 

I think the question, as I understand Senator 
Burton's notes, deals with the tracking system that was 
developed. It was not implemented, I don't believe, by the 
Board of Prison Terms. 

And the concern was that you had many parolees 
returning, and having to wait much longer than the 45 days in 
order to be assessed. Some of them, in fact, were spending more 
time being held and exceeding the term for which they had been 
returned for in excess of this time. 

So, I think the question is, and of course, this 
was raised in the OIG's report, why wasn't the tracking system 
implemented? What was the problem? 

MR. ANGELE: As far as I know, the funding. 

SENATOR ROMERO: Funding. Can you elaborate? 

MR. ANGELE: I've been told that the funds 
weren't available to put the process — to actually put the 
program into operation. 

A lot of the problems have to do, obviously, with 
manpower, and depending upon the number of people being revoked 
or being brought in for revocation hearings, and the number N of 
DCs available to handle the cases. 

SENATOR ROMERO: Did you want to elaborate on 

MR. SPEED: Yes, ma'am. 

I'm Marvin Speed, acting Executive Officer of the 
Board of Prison Terms. 

You're referring to the revocation scheduling and 
tracking system. 


MR. SPEED: One of the portions of that IG audit 
that wasn't fully explored is the fact that we have collective 
bargaining units that we have to meet and confer with in order 


to implement this program because it involves their workload. 

We were in the process of meeting and conferring 
and negotiating with the union. We actually implemented the 
process, and we do have an unfair labor practice and some 
grievances now. 

But the main delay was that meet and confer 
process with the collective bargaining unit. 

SENATOR ROMERO: And so at this point, what is 
the status. 

Basically, all we want is to make sure that when 
a parolee has — there's the obligation to make sure that the 
parolee is met before the 45 days, that that is taking place. 

What's going on now. 

MR. SPEED: Right. Revocation, Scheduling, and 
Tracking System has been implemented at 17 hearing sites. That 
is not the -- that is factor in the delays that we're seeing 
right now. One of the main problems with our whole process with 
BPT and CDC is the lack of an IT infrastructure. 

The other problem we have, the Armstrong 
litigation, which added several layers to the process, and there 
were some resource issues on CDC side and the BPT side. That's 
led to a delay of cases actually getting to the hearing sites. 
Often times, they're not even getting into the Board's 
jurisdiction until the 45 days has already run, so they're 
already late when they're getting to us. 

CDC has taken steps to resolve that issue by 
doing a file review. Again, this goes back to the lack of IT 
infrastructure. They have paper files that are about the size 


of a phone book for the 120,000 prisoners in the system. 

So, in relation to that Armstrong litigation, 
they have to go through each one of those files, pull out 
pertinent ADA documentation to determine whether a prisoner is 
an Armstrong class member or not, and then we go from there. 
But the process of actually pulling those files, and taking that 
paper out, then presenting it in a forum to the Board to review 
to determine who's a class member is what really slowed the 
process down. 

So, CDC has taken steps to correct that, and we 
have implemented the revocation, scheduling and tracking system. 
And we are currently in the middle of this Valdivia litigation, 
which will have an effect on the process as well. 

SENATOR ROMERO: One last question as well. I'm 
very much interested in looking at parole. We'll have a hearing 
a little bit later in the year. 

So, I'm very much interested in looking at parole 
and parole policy, and trying to understand how we, at this 
point at least, with CDC estimating we're going to get some 
65,000 parolees back into the system, I'm curious as to the 
discussion, and the OIG raises it in his report, with respect to 
even who sets, who establishes, parole policy? And there's some 
discussion between the Board of Prison Terms and CDC. 

For the nominee today, can you give me a little 
bit of your view as to the discussion on actually who should 
establish parole policy, and how do the two work together? 

MR. ANGELE: Are we talking specifically about 


SENATOR ROMERO: Just parole policy in general. 

MR. ANGELE: You're talking about parole in 
general? There 1 re two different aspects. 

SENATOR ROMERO: Well, parole in general, but I 
think the controversy rises — 

CHAIRMAN BURTON: If I could, I think the concern 
is what I said before. You're violating a lot of people on 
technical, CS stuff, and sending them back for short terms, 
which doesn't make much sense, period, and makes no sense at the 
time when we're trying to figure out how to reduce spending. 

Again, if somebody commits a crime, then try 
them, or judgment. But somebody pees dirty in a glass, or 
they're seen talking to the guy that was their cell mate for 
four years, I mean, it makes no sense. 

And those short-term things make little sense, 
because we're going to have the Budget Subcommittee, Senator 
Romero's committee, just see how much does the cost to send 
somebody back, just the administrative cost, and then the four 
months, and then letting them back out. What it is, is stupid. 

MR. ANGELE: I think — 

SENATOR ROMERO: And costly. 

CHAIRMAN BURTON: That's what makes it stupid. 

MR. ANGELE: I think we need to identify what the 
violation is, and also what the background of the inmate is. 

CHAIRMAN BURTON: What difference does it make? 

MR. ANGELE: Well, if the inmates has a long 
history of drug use, and he gets arrested for -- 

CHAIRMAN BURTON: He gets arrested for what? 


MR. ANGELE: Let's say possession charge or a 
dirty test. 

CHAIRMAN BURTON: We're talking about technical 
violations. An arrest is not a technical violation. Arrest is 
a new crime. 

SENATOR ROMERO: If he doesn't show up to meet 
with his- parole officer at the scheduled time. 

CHAIRMAN BURTON: I would like to get the number 
of technical violations, and length of time they serve, and what 
the cost is to do that. 

If they're arrested for possession, then you 
might figure, if it's chump change possession, do we really want 
to go through the whole thing and try on that? Or, is it in the 
best interest of justice, and whatever, just to revoke them send 
them back? 

But that is a lot different than the technical 
violations. That's somebody committed a crime, and then you 
can judge the nature of the crime and even the nature of the 
guy, or whatever. 

But we're talking about the technical violations 
of the 65,000. I don't know how many of them are technically 
violates . 

MR. ANGELE: Not being involved in the revocation 
process, I really don't have an answer for you, but I'll 
certainly look into this and try to ascertain what these techno 
violations are. 

CHAIRMAN BURTON: Well, they ought to be able to 
do it. I heard you tell us you've got a good computer system. 


MR. SPEED: I think I can be a little responsive 
to that question. 

The last reliable data we had, approximately 20 
percent of parolees that were returned to custody on revocations 
were for technical violations of parole. 

And just for clarification purposes, technical 
violations of parole, we have three types of violations codified 
in our regulations under Title 15. 

SENATOR JOHNSON: Am I am being asked to vote on 
this gentleman? 

CHAIRMAN BURTON: Well, you could well be some 

SENATOR JOHNSON: Why don't we hear from him on 

CHAIRMAN BURTON: He's trying to help. 

Some of us, when we present a bill, actually have 
our staff with us to explain the technicalities as opposed to 

Point well taken, Senator. 

This is what we want. We want to know what it 
is; how many people; and the costs on that. 

Maybe there's no need to do anything else. 

Any other questions, Senator? 

Senator Knight. Senator Karnette. 

SENATOR KARNETTE: No questions. 

CHAIRMAN BURTON: All right. Did you bring any 
family, Al, or anything? 

MR. ANGELE: I have my family away from home, 


members of the Board of Prison Terms. 

CHAIRMAN BURTON:. The IG's report has been very 
critical of the ' revocation process and how the Board handles 

We aren't going to resolve that here. I think 
that since Carol Daly's become the Chair, there was a new 
Executive Director replacing Hepburn and our former beloved 
colleagues, Jim Nielsen and the prior Executive Officer, that 
there has been improvement. 

But there's a lot that has to be done, and we 
appreciate the efforts. We appreciate the efforts being made. 
I just want to note for the record that the commissioners have 
to go through Civil Service, that the taping equipment at lifer 
hearings has improved, the votes are public, and there's more. 
I just think you're doing a much better job, and I think a fair 
job, both for the citizens at large and for the people that have 
been incarcerated. 

Anybody opposed to this? I'll move the 

SECRETARY WEBB: Senator Karnette. 


SECRETARY WEBB: Karnette Aye. Senator Knight. 
Senator Romero. 


SECRETARY WEBB: Romero Aye. Senator Johnson. 
Senator Burton. 


SECRETARY WEBB: Burton Aye. Three to zero. 



MR. ANGELE: Thank you. 

[Thereupon this portion of the 
Senate Rules Committee hearing 
was terminated at approximately, 
10:30 A.M. ] 

— 00O00 — 



I, EVELYN J. MIZAK, a Shorthand Reporter of the State 
of California, do hereby certify: 

That I am a disinterested person herein; that the 
foregoing transcript of the Senate Rules Committee hearing was 
reported verbatim in shorthand by me, Evelyn J. Mizak, and 
thereafter transcribed into typewriting. 

I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

jv IN WITNESS WHEREOF, I have hereunto set my hand this 
( y^ day of^^lAw^^ , 2003. 

Shorthand Reporter 


Additional copies of this publication may be purchased for $3.00 per copy 
(includes shipping and handling) plus current California sales tax. 

Senate Publications 

1020 N Street, Room B-53 

Sacramento, CA 95814 


Make checks payable to SENATE RULES COMMITTEE. 
Please include Stock Number 468-R when ordering. 

L $00 

wo • 5" 





APR - 1 2G03 



ROOM 113 


1:36 P.M. 





ROOM 113 


1:36 P.M. 

Reported by 

Evelyn J. Mizak 
Shorthand Reporter 










GREG SCHMIDT, Executive Officer 

PAT WEBB, Committee Secretary 

NETTIE SABELHAUS, Consultant on Governor's Appointments 






AGNES S. LEE, Deputy Secretary 
Health and Human Services Agency 



United Cerebral Palsy 


Mother to Ben, a teenager with physical and developmental 



California Association for Adult Day Services 

Private Citizen 


County Welfare Directors Association 


Proceedings 1 

Governor ' s Appointees : 

AGNES S. LEE, Deputy Secretary- 
Health and Human Services Agency 1 

Background and Experience 1 

Introduction and Support by 


Questions by CHAIRMAN BURTON re: 

Associate Secretary Vs. Deputy 3 

Witnesses in Support : 


United Cerebral Palsy 4 


Mother of Ben, Severely Disabled Child 5 


California Association for Adult Day Services 5 


Private Citizen 5 


County Welfare Directors Association 6 

Motion to Confirm 6 

Committee Action 6 

Termination of Proceedings 6 

Certificate of Reporter 7 

1 P-R-O-C-E-E-D-I-N-G-S 

2 --00O00-- 

3 CHAIRMAN BURTON: Agnes Lee, Deputy Secretary, 

4 Health and Human Services. 

5 MS. LEE: Thank you, Mr. Chairman and Members of 

6 the Senate Rules Committee, for the opportunity to appear before 

7 you today to seek your approval for my nomination for Deputy 

8 Secretary of the California Health and Human Services Agency. 

9 The Agency oversees the administration of over a 

10 dozen departments that administer various health and human 

11 services programs. The Agency's overarching goal is that all 

12 Californians, especially those most at risk or in need, are 

13 provided opportunities to enjoy a high quality of life as 

14 measured by sound physical, mental, and financial health of 

15 children, adolescents, and adults; strong and capable families; 

16 safe and sustainable communities; and dignity for all 

17 individuals. 

18 The Deputy Secretary reports directly to the 

19 Agency Secretary Grantland Johnson and serves as a key advisor 

20 on program and fiscal issues related to the departments under 

21 the auspices of the Agency. 

22 I am fortunate to have had the opportunity to 

23 serve as a staff person in the Legislative Analyst's Office and 

24 the Assembly Budget Committee, where I had the privilege of 

25 providing recommendations to Members of the Legislature on 

26 policy and budget issues in the areas of health and human 

27 services. During my legislative tenure, I worked extensively 

28 with staff and constituents on various issues that required 

intense collaboration, negotiation, and problem-solving. 

I believe my experience with the Legislature in 
the oversight of the state's health and human services programs 
has given me a unique perspective on program accountability. It 
is a perspective that I brought with me to the administration 
and that I incorporate in my day-to-day roles as advisor to the 
Secretary and to the executive staff of our departments. 

One of the main challenges facing our agency as 
well as others is addressing the impacts of the budget shortfall 
on our programs and the population served by those programs. 
People often ask me why I would want this position during these 
times. My answer is simple: It is times such as these that 
demand creative solutions, collaborative efforts, and strong 

My commitment is to meet this challenge and to 
continuously push for ways to move forward with our goals. 

Thank you again for your consideration. I will 
be glad to answer any questions you may have. 

CHAIRMAN BURTON: Senator Ducheny. 

SENATOR DUCHENY: Thank you very much, 
Mr. Chairman and Members. Sorry I'm a moment late. They got 
started without me, but I came really to recommend your 
confirmation of Agnes Lee as the Deputy Director. 

I know Secretary Grantland Johnson is very 
excited about her help, as we were -- and some of you will 
recall this -- when Agnes was the budget consultant that helped 
us all get through the welfare debates in ' 97 and worked with 
the Assembly Budget Committee for several years during that 

period and particularly during the discussions on welfare 

She was a great asset to us here in the 
Legislature, and I think she would continue to do that work, 
since she's been in the Agency, and particularly in this 

I can speak also for Senator Cedillo, who was the 
subcommittee chair that Agnes was consultant to. 

CHAIRMAN BURTON: Thank you, Senator. 

Do you have family, Agnes, you'd like to 

MS. LEE: Yes, thank you. 

CHAIRMAN BURTON: I think we hear one. 

MS. LEE: It's her nap time. 

I have my husband here, Darren Figgins, and my 
daughter Samantha, and my mother-in-law, Sandra Figgins. 

CHAIRMAN BURTON: We'll try to get through this 
early so the kid can take a nap. 

[Laughter. ] 

CHAIRMAN BURTON: Idle curiosity, but what's the 
difference between an Associate Secretary and a Deputy? 

MS. LEE: We have different levels of positions 
of secretaries in the Agency. The way the Agency is 
structured, you have — 

[Baby's loud crying.] 

CHAIRMAN BURTON: We're not going to be mean to 

[Laughter. ] 

MS. LEE: We have the Agency Secretary, then the 
Under Secretary, the Deputy Secretary, and then under that there 
are three associate secretaries: one for external affairs; one 
for legislation; and another for special programs and planning. 

CHAIRMAN BURTON: So, it's the Secretary, the 
Under Secretary, and then the others? 

MS. LEE: In this position, yes. 

CHAIRMAN BURTON: Senator Johnson. 

SENATOR JOHNSON: No questions. 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: No questions. 

CHAIRMAN BURTON: Senator Knight. 

SENATOR KNIGHT: No questions. 

CHAIRMAN BURTON: Senator Karnette. 

SENATOR KARNETTE: Well, I just want to 
congratulate you for coming in on your day off. That's why your 
family's here, I'll bet, the little one who's waiting for you 

CHAIRMAN BURTON: Witnesses in support? 

MR. OMOTO: Marty Omoto with United Cerebral 
Palsy, and also I'm a family member. My older sister has 
developmental disabilities. 

So, I want to commend Secretary Johnson for his 
appointment, and also our strong support for Agnes Lee. She has 
done a wonderful job in bringing families with people with 
disabilities together and believing in the state's commitment. 

I cannot tell you how she transformed a room a 
couple months ago of people who were very cynical into a room 

that wanted to be partners with the state. And I can thank her 
for that one on behalf of my sister. 

Thank you. 

MS. BOISOT: Terry Boisot, primarily a mother of 
Ben, who is deaf, blind, severely physically and developmentally 
disabled, and also an advocate for people. I sit on the board 
of the Ark of the United States. 

I would just like to reiterate what Marty Omoto 
just said. You did transform the room, Agnes. 

And when there was a lot of animosity and 
difficult feelings, Agnes changed all of that in a matter of 15 
minutes . 

Thank you. 

MS. MISSAELIDES: Good afternoon, Lydia 
Missaelides. I represent the California Association for Adult 
Day Services. 

I have known and worked with Agnes in all three 
of the key positions that she has held, and I'm here to 
enthusiastically support her confirmation today. 

Thank you. 

MR. McKEEVER: Mr. Chairman, Casey McKeever, 
formerly of Western Center of Law and Poverty, now with the 
Assembly Human Services Committee. 

But I'm speaking as a private person, as someone 
who worked with Agnes and found her to be extraordinarily 
competent and carrying, and someone who could realize the 
realities of what the state faced and try to do the best that 
was possible within the range of possibilities with difficult 

budget decisions, and did so on behalf of people who often times 
were not well represented. 

MR. MECCA: Thank you, Mr. Chairman. Frank 
Mecca with the County Welfare Directors Association. 

And for all the reasons you've already heard, we 
enthusiastically support Agnes' nomination. 

CHAIRMAN BURTON: Any opposition? 

Move the nomination. 

SECRETARY WEBB: Senator Karnette. 


Karnette Aye. Senator Knight 


Knight Aye. Senator Romero. 


Romero Aye. Senator Johnson. 

Johnson Aye. Senator Burton 

CHAIRMAN BURTON: Congratulations 
MS. LEE: Thank you. 
[Thereupon this portion of the 
Senate Rules Committee hearing 
was terminated at approximately. 
1:45 P.M. ] 

— 00O00— 

Five to zero. 


I, EVELYN J. MIZAK, a Shorthand Reporter of the State 
of California, do hereby certify: 

That I am a disinterested person herein; that the 
foregoing transcript of the Senate Rules Committee hearing was 
reported verbatim in shorthand by me, Evelyn J. Mizak, and 
thereafter transcribed into typewriting. 

I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

u ) I /■ 

^ IN WITNESS WHEREOF, I have hereunto set my hand this 


day o f VyV ^h^^-^^^L — - , 2003 


Shorthand Reporter 


Additional copies of this publication may be purchased for $3.00 per copy 
(includes shipping and handling) plus current California sales tax. 

Senate Publications 

1020 N Street, Room B-53 

Sacramento, CA 95814 


Make checks payable to SENATE RULES COMMITTEE. 
Please include Stock Number 469-R when ordering. 

L 5oo 





APR - \ 2003 



ROOM 113 


1:32 P.M. 





ROOM 113 


1:32 P.M. 

Reported by: 

Evelyn J. Mizak 
Shorthand Reporter 










GREG SCHMIDT, Executive Officer 

PAT WEBB, Committee Secretary 

NETTIE SABELHAUS, Consultant on Governor's Appointments 







California Institution for Men, Chino 

ROY MABRY, State President 

Association of Black Correctional Workers 

SUSHMA TAYLOR, Chief Executive Officer 
Center Point, Inc. 

RICHARD TATUM, State President 

California Correctional Supervisors Organization 

Public Utilities Commission 



Coalition of Utility Employees 



The Greenlining Institute 


Council of Asian American Business Association 


Senior Pastor 

Allen Temple Baptist Church 


California Manufacturers & Technology Association (CMTA) 

SHELLEY BERGUM, Executive Director 

Deaf and Disabled Telecommunications Program 


Center for Energy Efficiency and Renewable Technologies, Natural 
Resource Defense Council, Union of Concerned Scientists, and 
Environmental Defense 


Alliance for Retail Energy Markets (AREM) 


DOUGLAS HELLER, Senior Consumer Advocate 
Foundation for Taxpayer and Consumer Rights 




Proceedings 1 

Governor ' s Appointees : 


California Institution for Men, Chino 1 

Background and Experience 1 

Questions by CHAIRMAN BURTON re: 

Number of HIV Inmates 2 

Long-term Plans for HIV Inmates 2 

Treatment and Pharmaceuticals 2 

Vision for Pre-release Programs 3 

Reasons for High Overtime Rate 4 

Statements by SENATOR JOHNSON re: 

Pre-release System of Department 

Is Disgraceful 6 

Questions by CHAIRMAN BURTON re: 

Use of Prisoners to Tutor Others 7 

Some Type of "Scared Straight" Program 7 

Questions by SENATOR ROMERO re: 

Prisoners Re-entering System Due to 

Technical Parole Violations 8 

Steps Taken to Deter Recidivism 9 

Questions by SENATOR KNIGHT re: 

Some Recidivism Due to Preference 9 


Questions by SENATOR KARNETTE re: 

Pre-release Programs 10 

Questions by CHAIRMAN BURTON re: 

Average Length of Stay for Prisoners 

Who Are Back on Technical Violations 11 

Witnesses in Support: 

ROY MABRY, State President 

Association of Black Correctional Workers 12 

SUSHMA TAYLOR, Chief Executive Officer 

Center Point , Inc 13 

Questions by CHAIRMAN BURTON re: 

Number of Prisons Involved with 

Center Point , Inc 14 

RICHARD TATUM, State President 

California Correctional Supervisors Organization 15 

Motion to Confirm 15 

Committee Action 16 


Public Utilities Commission 16 

Introduction and Support by 


Opening Statement 17 

Questions by CHAIRMAN BURTON re: 

Recent FPPC Form 700 Filing and 

Free Parking at San Francisco Airport 17 

Reason Natural Gas Prices Are High and 

Effects on California 19 

Draft Energy Action Plan 21 


Importance of State's Recent Submittal to 

FERC Alleging Market Abuse 22 

Possibility of Inherent Conflict in 

Holding Companies and Their Utilities 23 

Need for Regulatory or Statutory Change 24 

Questions by SENATOR JOHNSON re: 

Requirement that Utilities Have First 

Call on Capitol of Holding Companies 25 

Ambiguity of Language 25 

Commission's Position on Legal Liability 

of Holding Companies 26 

Questions by CHAIRMAN BURTON re: 

Legislature Could Statutorily 

Obligate Holding Companies 27 

Questions by SENATOR JOHNSON re: 

Likely Outcome of Utilities Vs. 

Holding Companies Issue at Commission 27 

Questions by CHAIRMAN BURTON re: 

Reason for Vote on Sempra and Its 

Affiliates Complying with Decisions on 

Affiliate Transactions 27 

Obligation of Utilities to Serve at 

Just and Reasonable Prices 28 

Commission's Authority to Order 

Utilities to Take Certain Actions 29 

Path 15 29 

Remedies to Structural Flaws in Loan 

Structure to Maintain Direct Access 3 

DWR Bond Charges 31 

VI 1 

Questions by SENATOR JOHNSON re: 

PUC's and State's Ability to Act on 
Abuses Committed by LADWP and Other 
Municipal Utilities 31 

Any Discussion of FPPC Reporting 

Requirements During Process of 

Appointment 33 

Questions by SENATOR ROMERO re: 

Counter Argument to Opponents Who 

Allege Appointee is Anti- Consumer 34 

Questions by SENATOR KARNETTE re: 

Possibility of PUC Recommendation that 

Legislature Pursue Issue of Market 

Abuse by Munis 36 

Responsibility to Ensure There Is 

Enough Storage for Natural Gas 37 

Questions by CHAIRMAN BURTON re: 

Problem with Wild Goose Proposal 4 

Questions by SENATOR KNIGHT re: 

Position This Summer with Capacity 42 

Possibility of Importing Liquified 

Natural Gas from Alaska into California 43 

Questions by CHAIRMAN BURTON re: 

DWR' s Long-term Contracts Should Take 

Care of Summer Capacity 45 

Telecommunications 46 

Witnesses in Support: 


Coalition of Utility Employees 47 



Greenling Institute 48 

LINDSAY IMAI, on behalf of DARLENE MAR, Chair 

Council of Asian American Business Associations 51 


Senior Pastor, Allen Temple Baptist Church 

Oakland 52 


California Manufacturers and Technology- 
Association 54 

SHELLEY BERGUM, Executive Director 

Deaf and Disabled Telecommunications Program 54 


Center for Energy Efficiency and Renewable 


Natural Resource Defense Council 

Environmental Defense 

Union of Concerned Scientists 56 


Alliance for Retail Energy Markets 57 

Witness with Concerns: 


TURN 57 


Baseline Expansion 59 

Passing on Bond Surcharge 59 

Questions to MR. PEEVEY by SENATOR JOHNSON re: 

Proposed Pilot Project re: Metering 61 

Witness in Opposition: 

DOUGLAS HELLER, Senior Consumer Advocate 

Foundation for Taxpayer and Consumer Rights 62 


Questions by CHAIRMAN BURTON re: 

Commission Plans to Reopen the Record on 

Direct Access Exit Fees 66 

Forced Loan 66 

Reason for Voting Against ALJ' s 

Decision on SDG&E Case 67 

Statements by CHAIRMAN BURTON re: 

Concerns about Furthering Business 

Climate in California at Expense of 

Residential and Small Business 

Consumers 69 

Intention 69 

Motion to Confirm 69 

Committee Action 70 

Statements by CHAIRMAN BURTON re: 

FPPC's Issuance of Fines for 

Violations 70 

Termination of Proceedings 70 

Certificate of Reporter 71 

1 P-R-O-C-E-E-D-I-N-G-S 

2 --00O00-- 

3 CHAIRMAN BURTON: Warden DiCarlo. 

4 MS. DiCARLO: Senator Burton, Senate Rules 

5 Committee and those present, good afternoon. Thank you for the 

6 opportunity to come before you to present my qualifications as 

7 the Warden for the California Institution for Men. 

8 My professional experience includes serving in 

9 the Department of Corrections for over 26 years. My experience 

10 has been drawn from assignments at two institutions covering all 

11 levels of inmate custody, from inmates housed in a minimum 

12 facility to inmates housed in the administrative segregation 

13 unit. 

14 My managerial assignments have included 

15 Correctional Captain, Associate Warden, Chief Deputy Warden, and 

16 since November of 2000, Warden of California Institution for 

17 Men. 

18 My formal schooling includes a Bachelor of Art 

19 Degree in behavioral sciences with a minor degree in criminal 

20 justice and corrections. I also completed some graduate work at 

21 Laverne University. 

22 My focus includes maintaining public safety in an 

23 efficient manner, making CIM a meaningful and safe workplace for 

24 the employees, a beneficial and safe place for the inmates 

25 serving their sentences, and as a valuable neighbor to the 

26 surrounding community. 

27 I'd be happy at this time to answer any questions 

28 you may have. 


In your Statement of Goals, you talk about your 
institution has an evolving HIV mission. How many HIV inmates 
do you have? 

MS. DiCARLO: We have in the Del Norte unit at 
CIM, the east facility, 180, and at the minimum support facility 
we're now in the process of activating 100 beds. 

CHAIRMAN BURTON: And what are your long-term 
plans for these? 

MS. DiCARLO: The long-terms plans are to reach 
the activation level of the 100 beds at MSF and fully integrate 
them into the programming. 

CHAIRMAN BURTON: They get all treated, I guess, 
with the appropriate medication and everything? 

MS. DiCARLO: Absolutely. We have a licensed 
hospital, and so they have on-site medical and the 
pharmaceuticals follow-up. 

CHAIRMAN BURTON: The pharmaceuticals, are they 
essentially purchased? In other words, does CDC buy them? You 
tell them what you need, and then they buy in bulk? Idle 

MS. DiCARLO: Our HIV drugs, I believe, last 
year were close to $3 million, and that's based on what the 
inmate is prescribed, and that's how they're purchased and 

CHAIRMAN BURTON: So I mean, you need X drugs. 
You tell CDC, and then they do — 

MS. DiCARLO: Our pharmacy actually coordinates 

the purchase of those. 

CHAIRMAN BURTON: With CDC or on their own? 

MS. DiCARLO: I'd have to check with the 
actual -- 

CHAIRMAN BURTON: That's cool. 

You also mentioned restructuring pre-release 
classes, which I think many of us think that one of the 
unfortunate things about the corrections system is, it probably 
doesn't correct. I mean, it's been very meaningful since we 
took rehabilitation out. 

But the pre-release programs, people, a lot of 
them aren't the brightest bulbs. They're dumped out in the 
street with no training, no prep, et cetera. 

What do you envision or what are you doing? 

MS. DiCARLO: We're actually evaluating our 
process now to maybe combining our basic education programs to 
enhance, like stand-alone programs and issues, parenting, anger 
management, specific to what the inmates are requesting and 

Our re-entry program, we currently have a 
six-week program with 27 students. And we recently gained a 
teacher from the closure of NCWF, and so it's our plan to 
activate another re-entry class with that instructor. 

CHAIRMAN BURTON: So, somebody's getting out June 
first. Six weeks prior to that, you do what with them? 

MS. DiCARLO: They can be placed into that 
re-entry program, and for the last six weeks -- 

CHAIRMAN BURTON: What would the re-entry program 


MS. DiCARLO: It has life skills. We do some 
proctoring of a DMV test. Have an overall community skills. 
Parole agents come out and speak with them regarding their 
responsibility in the community. Other community leaders. Very 
basic things to how to balance a checkbook. 

CHAIRMAN BURTON: Your institution has probably 
the highest OT rate in the system, or one of the highest. Why 
is that? Are you understaffed or what? 

MS. DiCARLO: We have three primary drivers that 
I could share with you. One is the coverage behind sick leave, 
which includes sick leave self, people out on long-term sick, 
family leave, and other issues like military leave. 

Also, we have a very large Reception Center 
mission for a thousand. The Reception center, overcrowding is a 
very large driver. Add sick overflow and medical guarding. 

As I shared with you, we have a licensed 
hospital, and we also have a contract with the Riverside 
Regional Medical Center. Requires a lot of medical transport. 
We have 22 folks that receive dialysis, so transportation to and 
from those appointments, and to other outpatient. 

CHAIRMAN BURTON: Is it a correctional guard that 
drives the ambulance, and a correctional guard that's in the 
back with the patients while they're in the ambulance? 

MS. DiCARLO: It could be taking them where they 
don't need a medical personnel attending. For instance, if 
they're going to a consult clinic at RCMC, then they're just 
transporting the inmate to that. 

1 CHAIRMAN BURTON: How many guards would be in 

2 that one? 

3 MS. DiCARLO: Typically there would be two, maybe 

4 three. 

5 CHAIRMAN BURTON: Are they all Charles Manson or 

6 what? 

7 MS. DiCARLO: No, but many of our inmates are in 

8 our Reception Center, so they're not classified. 

9 CHAIRMAN BURTON: You have an idea; don't you? 

10 MS. DiCARLO: We have an idea, yes. 

11 CHAIRMAN BURTON: If they're in on petty theft 

12 with a prior, or they're in as mass murderers — 

13 MS. DiCARLO: Oh, no. We have their case 

14 factors. 

15 CHAIRMAN BURTON: Why would it take three guards 

16 to take one person? 

17 MS. DiCARLO: It's usually a group of inmates. 

18 Like for instance, our dialysis, it's by groups, yes. 

19 CHAIRMAN BURTON: But the driver could just be -- 

20 MS. DiCARLO: An officer. 

21 CHAIRMAN BURTON: The driver could just be a 

22 driver, couldn't they, as opposed to somebody getting all that 

23 stuff? 

24 MS. DiCARLO: Well, there's specific reg — 

25 CHAIRMAN BURTON: I feel good today; okay, you 

26 did your physical fitness test. 

27 I mean, do you ever give any thought to that? Or 

28 would that be a job action somewhere or something? 

MS. DiCARLO: That would be a departmental issue 
in terms of -- 

CHAIRMAN BURTON: It starts at the top. 

But if you had one patient going to a place that 
had to go out, that'd probably be a driver and one? 

MS. DiCARLO: And one, correct. 

CHAIRMAN BURTON: Senator Johnson. 

SENATOR JOHNSON: Mr. Chairman, I have no 
questions, but I just feel constrained, as I have with other 
wardens here, to say that, speaking as one Republican Member of 
the Senate, I think it's absolutely disgraceful that our prison 
system fiddles around in the last five or six weeks with some of 
the prisoners, when the great bulk of them, it's known from the 
day they walk in the door that they're going to be going back 
out at some point. And that process ought to be continuing 
throughout the entirety of their incarceration. 

You have a couple of little half assed lectures 
the last few weeks for some of them and not al of them, I think, 
is a disgrace. 

I intended to ask you your views of that, but the 
Chairman's already asked and didn't get much of an answer, so I 
doubt that I would either. 

No further questions. 

CHAIRMAN BURTON: Would you like to comment? 

MS. DiCARLO: Well, I'd like to express at least 
my interest in trying to make the educational process more 
meaningful, and operating within the resources that we have. 

I believe our academic personnel are very 

committed to that in what they deliver everyday. 

CHAIRMAN BURTON: In other words, you're 
understaffed with the type of stuff that we're talking about? 

MS. DiCARLO: I just think we have established 
curriculums that maybe do need to be re-evaluated. 

For instance, within the institution, enhance 
some of their experiences. You know, I believe that is 

CHAIRMAN BURTON: In fact, I think this came out 
on some other wardens, but have they ever thought of having, and 
this would be something with the Governor, but having some of 
the more -- I was going to say intelligent, but if they're 
intelligent they might not be in jail — but some of the more 
educated prisoners tutoring, you know, in the basics? 

MS. DiCARLO: We have tutors in the literacy 
programs within the institution. 


MS. DiCARLO: Yes, and student assistants in the 

SENATOR KARNETTE: Do they get paid? 

MS. DiCARLO: Yes, some are pay numbers, yes. 

CHAIRMAN BURTON: You know, you see on television 
where young kids are brought into prisons and get the hell 
scared out of them by cons that have been in there for a long 
time . 

I wonder if they have that same type of program 
for, shall we say, either first arrested or first convicted to 
kind of let them know that if they get a chance to get out, they 


ought to take it and stay straight, because coming back in a 
second time is not really a lot better. 

I know that, one, although you wouldn't know it 
from the budget, that you're short on money because of a variety 
of factors, even though it's a lot of money spent. 

I just think that it's incumbent on the wardens 
to be as imaginative as you can, and do as much as you can, not 
necessarily on the cheap, but whatever. Then maybe some of that 
could cut into the OT. 

Senator Romero. 


There's been a lot of discussion about recidivism 
in Corrections up and down the state. 

What percentage of your inmates do you know 
off-hand are there because of violations, technical violation of 

MS. DiCARLO: I couldn't give you the exact 
percentage, Senator. I'd have to, you know, get the -- 


MS. DiCARLO: A ballpark would be, technical — 
you mean what kind of technical violations? 

SENATOR ROMERO: Not showing up to meet — 

CHAIRMAN BURTON: Peeing dirty in a bottle, not 
showing up to see their parole officer. 

MS. DiCARLO: Dirty tests, those type, or 
associating, or whatever, probably 60 to 70 percent, I would 

SENATOR ROMERO: That's why there's a lot of 

1 discussion about parole in Corrections right now. 

2 What observations do you have with respect to 

3 what can be done to deter and to perhaps think about those whom 

4 we actually do incarcerate, that we will not have these, the 60 

5 or 70 percent that are there for some technical, we can address 

6 those, but do we have to incarcerate them? 

7 What are you doing? 

8 MS. DiCARLO: You have to look at the behavior 

9 that gets them back. And some of these folks are multi-termers. 

10 You have to look at the actual behavior that keeps bringing them 

11 back and address that. So, if it's in terms of drug use, or if 

12 that's the nature of their repetition and their cycle, is how do 

13 you really address the drug use, and what keeps bringing them 

14 back into the system. 

15 And maybe in terms of the follow-up and after 

16 care, and that transition time period. So that, for instance, 

17 they're just not on a continual cog in a wheel, but the after 

18 care. So they don't get into a routine, go out, spend a few 

19 months on the street, come back to prison. 

20 SENATOR ROMERO: Thank you. 

21 CHAIRMAN BURTON: Senator Knight. 

22 SENATOR KNIGHT: Yes, thank you, Mr. Chairman. 

23 With that recidivism rate, one might question is 

24 there a faction that would come back because they like it there? 

25 They get three squares a day, and medical, and you know. Is 

26 there a faction -- 

27 MS. DiCARLO: I would have to say 

28 institutionalization would have to account for a portion of 


these folks that do. And I don't think you could discount that. 

SENATOR KNIGHT: You don't have a percentage? 


CHAIRMAN BURTON: Senator Karnette. 

SENATOR KARNETTE: I'd like to refer back to what 
Senator Johnson was saying about this information that's given 
to the inmates before they leave. 

And I was thinking, they probably come in and 
just give a lecture. And people listen, but does anybody know 
whether they really absorbed it? 

In other words, it might be more sensible to do a 
week, and then have them study a little bit, then make them 
listen two or three more weeks if they didn't seem to know how 
to balance a checkbook, or whatever it is. 

Just coming in, I'm wondering, do you do anything 
of that sort? 

MS. DiCARLO: Practical application. Like, for 
instance, we had administered the DMV test as it would be 
administered at the DMV, since they don't come in any more. So, 
in those ways we can give tests. 

But in terms of actually instilling those life 
skills, I don't know if there's a measurement, Senator. 

SENATOR KARNETTE: But if you just come in and 
talk to somebody for a few hours, or it's three weeks you have, 
unless there's some kind of follow-up or some reason for them to 
learn it or to absorb it, is there any way you could figure out 
a way that you could make it more likely that they absorbed it? 

I think if you thought about that, have the 


1 people who come in think about that a little bit, because 

2 anybody can sit and listen to something and absorb nothing. We 

3 do quite a bit of that sometimes. 

4 But I just think something like that. I know 

5 what happens in these kinds of cases any place, I mean, any kind 

6 of organization where people have to listen to somebody talk and 

7 give them information. 

8 MS. DiCARLO: Unless it's meaningful to them, and 

9 how do we measure that? And how they received it. 

10 SENATOR KARNETTE: Right. You can measure it 

11 probably, but making sure it happens and getting them to absorb 

12 it is something else. 

13 Well, I just think it's worth looking into 

14 without costing any more money maybe. 

15 MS. DiCARLO: Thank you. 

16 CHAIRMAN BURTON: I don't know how you teach 

17 somebody life skills in six weeks, as Senator Johnson said. I 

18 think you have to start that earlier. 

19 Now the 70 percent of the people you have there 

20 that come back for technical violations, my theory is, they 

21 commit a crime, like a crime-crime; retry them, put them in 

22 jail. 

23 Do you know what the length of stay is? We have 

24 heard statistics that a high percentage are back there for less 

25 than six months. Is that -- 

2 6 MS. DiCARLO: Seven months up to a maximum of one 

27 year. 

28 CHAIRMAN BURTON: The reprocessing, getting them 


back in, that's a fair piece of the cost, right, the 
administrative cost of re-getting them in? 

MS. DiCARLO: Yes, it is. 

CHAIRMAN BURTON: So really, it makes an 
inordinate amount of sense for people to be brought in for a 
three-month period for not doing too much. But I think that's a 
problem basically system-wide, not necessarily your thing. 

Witnesses in support, Brother Mabry. He's a 

It's always good to see you, sir. 

MR. MABRY: Thank you. Yourself also, and your 
Committee Members. 

My name is Roy Mabry. I'm the State President 
for the Association of Black Correctional workers. 

And I'm here in full support of Warden DiCarlo's 
confirmation today. 

I must tell you that it's sort of exciting when 
ever we get somebody from the Inland Empire here for 
confirmation, especially when they've worked every level of the 
system up to the point of this confirmation. And I think that 
is something that even this entire committee should consider as 
a required to do in order to get to this position in terms of 
the service you've provided to get to this point. 

If there's no offense to the Committee or to 
Lori, I'd like to give her a hug and bestow congratulations. 

SENATOR JOHNSON: Just a quick question. 

Did you say someone from the Inland Empire? 

MR. MABRY: That's correct. 


1 SENATOR JOHNSON: I was under the impression you 

2 were a constituent of mine. 

3 MS. DiCARLO: I am. He means a prison in the 

4 Inland Empire. 

5 [Laughter. ] 

6 MR. MABRY: She's a Republican also. 


8 DR. TAYLOR: Thank you, Senator Burton and 

9 Members of the Committee. I'm Dr. Sushma Taylor. I'm the CEO 

10 of Center Point, Inc. Center Point, Inc. is located in Marin 

11 County, Senator, your home district. However, we have programs 

12 throughout the state. 

13 Some of the programs that we operate are 

14 in-custody, therapeutic community programs under the auspices of 

15 the Department of Corrections, Office of Substance Abuse 

16 Programs. 

17 We operate a program in Warden DiCarlo's 

18 institution. Our program is offering 200 inmates treatment, 

19 life skills training, training in literacy, and preparing them 

20 for work release. 

21 CHAIRMAN BURTON: At that institution? 

22 DR. TAYLOR: Yes, sir. And Warden DiCarlo has 

23 been very, very supportive of our program, of our efforts. She 

24 has made sure that the classification into our program has been 

25 streamlined so that the capacity of 200 is never much below the 

26 threshold. 

27 We provide transition to community programs so 

28 that there is a reduction in the return to custody rates. And 


the type of programs that we operate, I think, should be in more 
institutions . 

And if we had wardens who would be more 
welcoming, and who would make sure that the custody staff that 
were assigned to our unit would be equally supportive, because 
the custody staff and the treatment staff go through several 
weeks of cross-training, so that the custody staff assigned to 
our unit, our ward and yard, speak some of the treatment 
language which is so important. 

And a lot of the people that we are seeing are 
there because of return to custody due to drug problems, and due 
to an inability to get jobs, and maintain jobs, or to be able to 
integrate with their families. 

So, we hope that you will look into more of those 
type of programs and support wardens who actually believe in 
that kind of rehabilitation. 

So, we would like to support Warden DiCarlo's 

CHAIRMAN BURTON: How many prisons are you in? 

DR. TAYLOR: Five California prisons, from Sierra 
Conservation Center and Base Camp -- 

CHAIRMAN BURTON: Five out of how many prisons? 

DR. TAYLOR: Well, there' re actually 32 other — 
there are 32 contracts in the California prisons: 8,301 beds 
are on line right now. And you have legislated a 9,000-bed 
implementation prior to the triggering of the Delano Prison 

So, we're hoping to be able to get to additional 


beds, but 8,301 beds are on line. 

CHAIRMAN BURTON: Questions of the witness? 

Next witness in support. 

DR. TAYLOR: Thank you. 

MR. TATUM: My name is Richard Tatum, spelled 
T-a-t-u-m. I'm the State President of the California 
Correctional Supervisors Organization, which represents, now 
represents, the majority of the supervisors in the Department of 

Review also of our chapter people at 
Ms. DiCarlo's institution, we would like to request that this 
Committee support her. They support her. Our organization 
supports her. 

With her vast experience she's had, coming up 
through the ranks, with her ability as an open-door policy in 
dealing with our people that we have, we'd request at this point 
that you make her a warden permanently. 

CHAIRMAN BURTON: Other witnesses in support? 

Any witnesses in opposition? 

Pleasure of the Committee. 


CHAIRMAN BURTON: Moved by Senator Johnson. Call 

the roll. 

SECRETARY WEBB: Senator Karnette. 


Karnette Aye. Senator Knight 


Knight Aye. Senator Romero. 



SECRETARY WEBB: Romero Aye. Senator Johnson. 


SECRETARY WEBB: Johnson Aye. Senator Burton. 


SECRETARY WEBB: Burton Aye. Five to zero. 

CHAIRMAN BURTON: Congratulations, Warden. 

MS. DiCARLO: Thank you. 

CHAIRMAN BURTON: Mr. Mabry never does hug the 

male wardens. 

[Laughter. ] 

CHAIRMAN BURTON: Senator Scott. 

SENATOR SCOTT: It's my privilege to introduce 
the next gubernatorial nominee. He is my constituent, and he is 
also a friend of mine, Michael Peevey. 

Mr. Peevey has the unusual background of being 
someone who's quite familiar with labor, having served as the 
Public Relations Director for the statewide AFL-CIO, and with 
industry having served as President of Southern California 
Edison . 

I remember when coming to the Senate and the 
great electrical crisis that we had in the State of California, 
that I went down to Mr. Peevey' s office. And Mike took over an 
hour with me, going through the intricacies of the electrical 
crisis, explained it in better detail and with deeper 
understanding than anyone else I'd talked to. And being someone 
who came out of the background of education, I needed a lot of 
education in the area of electricity. 


So, I'm very pleased to introduce to you Michael 
Peevey, and certainly indicate my strong support for your 
approval of his nomination to the Public Utilities Commission. 

CHAIRMAN BURTON: Thank you, Senator. 


MR. PEEVEY: I was hoping I'd have my Assembly 
Member here. 

CHAIRMAN BURTON: She read the Chronicle story, 
and she's boycotting. 

[Laughter. ] 

MR. PEEVEY: Which Chronicle story was that? 
There's been quite a few. 

Chairman Burton and Members of the Committee, I'm 
pleased to be here this afternoon and to answer your questions. 

It was a little less than a year ago I was 
appointed to the Public Utilities Commission by the Governor, 
and a little more than two months ago that he named me as its 
President . 

And it's been a rather exciting first year, and 
I'll let it go at that. Happy to answer your questions. 

CHAIRMAN BURTON: There was a story in the local 
paper, my local paper, which you may or may not be familiar 
with. It basically dealt with the amended filing on the airport 

MR. PEEVEY: Yes, the Form 700. 

CHAIRMAN BURTON: Right. In your amended filing, 
you made a statement about -- I don't know if the other Members 
have read it, so if you just briefly want to say what it is was, 


why it was, and we'll move on to stuff of more significance. 

MR. PEEVEY: Let me just address that. It wasn't 
an amended filing. It was just a filing. I made a filing on 
Monday. It was a regular Form 700 filing; there was no 
amendment to anything. 

I reported that last year I received as a gift 
under the law, as I understand the law to be, $2,134 in free 
parking at San Francisco International Airport. That was what I 
reported in the form. 

I didn't see it in the Chronicle today. I was in 
Southern California; came up this morning. 

In all candor, I did not know the gift 
limitation, which I've subsequently found out is $320. 

But to give you some real context about all this, 
I went on the Public Utilities Commission in March of last year. 
Several weeks prior to that -- and I hate to go into this, 
because I'm a private person and this is a personal matter, but 
since someone else has chosen to make it public, I guess I have 

Several weeks prior to that, I had an operation 
for lung cancer. I had 60 percent of my left lung removed. I 
was under doctor's care when I went on the Public Utilities 
Commission. And actually, the doctor advised me not to fly at 
all. I flew up here every week to San Francisco for several 
weeks for the rest of the year. 

I asked the Executive Director of the 
Commission -- shortly after I went on the Commission I commenced 
right at the same time, I commenced chemotherapy treatment, 


which is not a pleasant experience for anybody, and it wasn't 
for me. In addition to the physical manifestations that are 
obvious in such situations, there is the -- it's wearing and 

And I asked our Executive Director at the 
Commission if there was a way to make this easier, if I could 
just get a parking pass at San Francisco Airport. I could just 
drive down there, because the Commission gives you a car, at the 
conclusion of business and park the car there. And that's what 
I did. And I did that 14 times. 

And of that, as it turned out when I went back 
and audited it myself, eight of those times it was on state 
business which the state did not pay for. I could have 
submitted receipts for that to the state and charged $1500. 
Some of the other times were for chemotherapy treatments. 

And that's the bottom line. 

CHAIRMAN BURTON: So, that was the reason there 
was an issue dealing with something at the airport and you had 

MR. PEEVEY: That's correct. 

CHAIRMAN BURTON: Getting into problems, do you 
have any concept why natural gas prices are just going up so 
dramatically, and in what way will the price spikes affect 

MR. PEEVEY: Well, natural gas prices are going 
up, apparently, for a variety of reasons. Obviously, colder 
weather in the east coast, inadequate overall supply in terms of 
delivering it to California are factors in all this. 


It will have consequences unless it's 
ameliorated, because natural gas is fuel of preference for much 
of California's electrical generation, as well as used 
significantly by homeowners and others for heating purposes. 

Unfortunately, the California Public Utilities 
Commission does not set natural gas prices at the wholesale 
level. They're set, or the market, the Federal Energy 
Regulatory Commission opened this up many years ago, and it 
comes and goes, it ebbs and flows in terms of price. Whenever 
there's a spike or consequently cold weather in the east, the 
prices tend to go up. 

What we have to do in California, there's many 
things we have to do. I'm certainly open to examining this very 

But what we need is greater supply, more pipeline 
capacity, and we need greater storage facilities in California 
so that we can buy in the summer, when gas prices are lower, and 
use it in the winter, just like the squirrel stores away its 
nuts. That's the basic principle that has operated in this 
state . 

But as we grow, and demand grows for gas, we 
haven't kept up as we should. So, we tend to become subject to 
these variations in price that have negative consequences as 
they roll through the economy. 

We're seeing the same thing in gasoline prices. 
And we're going to have to increase supply very significantly. 
That's all there is to it. 

CHAIRMAN BURTON: How does the Energy Action Plan 


propose to address natural gas prices, or does it? 

MR. PEEVEY: It does. Remember, this is a draft 
plan. This has not been adopted by the various agencies. This 
is a cooperative. 

We say in there that the high and volatile price 
of natural gas contributed significantly to the energy crisis in 
2000-2001, and we call for the Governor's Natural Gas Working 
Group to monitor natural gas supply, demand, and price, and to 
facilitate the construction of California in infrastructure 
projects . 

We also call for four specific actions in this 
Action Plan. Identify new gas transmission, distribution, and 
storage facilities needed to meet our future needs is number 

Two, monitor the market to identify and correct 
the exercise of market power and manipulation where it exists, 
and I think that is a proper function for the Commission. 

Three, evaluate the net benefits of increasing 
the state's natural gas supply options, such as LNG, liquified 
natural gas. 

And four, support electric utilities and gas 
distribution companies entering into longer term contracts as a 
hedge against volatility and high prices. 

Those are specific things that this draft plan 
suggests . 

CHAIRMAN BURTON: I start when Congress, over my 
vote, deregulated natural gas. That was going to solve all the 
problems, which I guess it did for the industry. 


What do you consider the importance of the 
state's submittal to FERC this week of the allegations on market 
abuse by a variety of participants, from some of the munis to 
some of the generators? 

MR. PEEVEY: Well, I mean, it's incredibly 
significant. The product that was submitted to FERC on Monday 
is a reflection of the hard work at the Attorney General's 
office, the Governor's office, and the Public Utilities 
Commission staff and all. 

I think the -- 

CHAIRMAN BURTON: How about the Select Committee 
on Market -- 

MR. PEEVEY: The Select Committee, I was getting 

CHAIRMAN BURTON: It made Bill Morrow happy when 
they threw the munis in, I'll you that. 

MR. PEEVEY: But, you know, the whole — it runs 
over a thousand pages, and it has 348 exhibits, or something of 
that number. And it's still sealed, although there seems to be 
a crescendo of support now for taking the seal off. I saw on 
the news just this morning that apparently some FERC staff is 
supportive of this now, too. 

So, I think very soon we'll be able to get all 
the details of the pleading. I have not seen it all. 

But it's deeply troubling that so many people 
participated in this. I mean, it was rampant. It was not 
just -- it was not just Enron. Some of these names we heard, 
Fat Boy, and Death Star, and Ricochet, and all that, came out of 


the Enron vernacular, but it's much, much more -- much broader 
than that. 

People deliberately withheld generation, as well 
as played around with trading. 

Regrettably, I'm afraid, I mean, it looks like, 
although I don't want to be conclusive here because the pleading 
is still sealed, that there was a significant amount of 
participation by some, at least, municipal utilities in some of 
these trading schemes. It's, you know, it was putting whatever, 
their community was first and the state second in those 
instances. And I think it's deeply regrettable. 

And you know, we'll get to the bottom of this. 

Senator, I think that this is, now that we've 
made this filing with the FERC, this frankly is the acid test 
for FERC. We've seen an appearance sake, a gentler, kinder 
FERC. We're going to find out if it's just appearance or 

So, it's truly the acid test as to whether 
California is going to get significant relief, and we're seeking 
$9 billion here. So, this is not small potatoes. 

CHAIRMAN BURTON: Do you think there's an 
inherent conflict between a holding company's desire for profit 
and the utility's obligation to their customers for reasonably 
priced electricity? 

I mean, it's like, at least according to press 
reports, et cetera, that Sempra Energy, the holding company for 
San Diego Gas, was involved in this. 

Is it just kind of an inherent conflict that the 


holding company's got one responsibility, that is grab as much 
as they can, but the utility under them has got a responsibility 
to provide, you know, reasonable and sufficient electricity to 
the extent they can? 

MR. PEEVEY: Or gas. Yes, there can be. 

My view on this is that, if you're going to have 
a holding company utility structure, you have to build a wall so 
high that you can't have the back and forth. But in reality, 
that doesn't seem to work well. I mean, I could cite my own 
experience. If you're high enough in the organization, you can 
see over the wall, to put it bluntly. 

So, I mean, I think this is a reasonable concern 
as to what structure properly we should have going forward. 
There is definitely some potential, significant potential, for 
abuse . 

And as Senator Johnson and I talked about it in a 
different venue, I mean, we had these situations where a lot of 
money was dividended up with consequential impacts afterwards 
that are now difficult to determine whether anybody's interest 
was served. 

CHAIRMAN BURTON: So, can the Commission do 
something regulatory, or is it left for Legislature to do 
something statutorily? 

MR. PEEVEY: No, the Commission — the Commission 
in the '80s and in the early '90s responded to each of the major 
utilities seeking to create a holding company by allowing each 
to create holding companies with various conditions placed on 
them; with various conditions placed on them. I think Edison 


was the first to have an approval. I think PG&E was last. I 
may be wrong in the sequencing exactly there. And the 
Commission can alter that. 

CHAIRMAN BURTON: On this issue, Senator Johnson. 

SENATOR JOHNSON: Yes, just on that point. 

It's my understanding that at the time that the 
Commission allowed for that, they put in place a requirement 
that the utilities would have first call on the capital of the 
holding companies, the parents that, in effect, that were being 

Would you agree with that characterization? What 
is the position of the Commission on that, whether that language 
meant that the parents were responsible for these utilities? 

MR. PEEVEY: The language is somewhat ambiguous, 
and there's no commissioner around today that was around there 
in the '80s when this was voted out. I mean, that's the hard 

CHAIRMAN BURTON: They're not all dead. 

MR. PEEVEY: No, I don't think they're all dead, 
at least they haven't recognized it in every case. 

[Laughter. ] 

CHAIRMAN BURTON: There was no record or 

MR. PEEVEY: There is, but the record is 
ambiguous in what happened. 

CHAIRMAN BURTON: There wasn't a clear reading of 
the language of that? 

MR. PEEVEY: I think it's fair to say it's not 


crystal clear. And you'll find Commissioners who are around 
today that voted for it at the time who have different 
recollections of what they did. I mean, Don Vial would say, 
"Absolutely, what Senator Johnson has said is true; that the 
first call means -- " 


MR. PEEVEY: That's right, first call. 

But others who voted for it at that time would 
say -- tell you something differently. 

And we've had a proceeding at the PUC on this 
matter, and frankly, having been one who had something 
indirectly to do with this when I was at Edison, I recused 
myself from that discussion. 

SENATOR JOHNSON: All right. I understand. 

MR. PEEVEY: I think it passed three-to-one to go 

CHAIRMAN BURTON: I was talking about now. 

SENATOR JOHNSON: To me, the language was pretty 
clear. It was capital. And I understand that people have come 
along after the fact and said, well, that meant capital projects 
as opposed to an infusion of capital into a troubled utility. 

But I guess I'm trying to get at, what is the 
position of the Commission as a whole today as to whether 
there's legal liability on the part of those holding companies? 

MR. PEEVEY: I think the majority of the 
Commission feels that there is some responsibility. I don't 
know if it passes the legal liability question with exactitude, 
but it certainly is clearly a responsibility, yes. 


1 CHAIRMAN BURTON: So, if the Commission doesn't 

2 know what it's doing, feel like it's doing, can't do it, we 

3 could statutorily do it? 

4 MR. PEEVEY: Of course. You could always 

5 statutorily do it, too. 

6 SENATOR JOHNSON: Senator Burton, I recall, at 

7 the time said when his daughter gets into financial difficulty, 

8 that he comes to her aid. Why? Because he's her parent. 

9 I think here you had clear obligation that these 

10 folks, these holding companies, really had a responsibility. 

11 I guess I'm still a little confused. What is 

12 likely to occur at the Commission on this issue? 

13 MR. PEEVEY: Well, just on the way of analogy, I 

14 think Senator Burton may come to his daughter's aid in certain 

15 circumstances because he is of good heart. I don't think that 

16 he has legal responsibility to do so. 

17 CHAIRMAN BURTON: It's just a simple answer, 

18 Michael. It's a yes, or it's no, or I don't know. 

19 MR. PEEVEY: No, I'm agreeing with him. 

20 CHAIRMAN BURTON: I understand you don't know. I 

21 know that part, but you don't know if, and it might be. Maybe 

22 we may just need to do a clarifying bill. 

23 Let me ask you this. I've got a couple more on 

24 this. 

25 What was the thinking on your vote as to looking 

26 into whether Sempra and the affiliates complied with the 

27 decisions on the affiliate transactions? I think it was a 

28 three-to-two vote. 


MR. PEEVEY: You mean last week. 


MR. PEEVEY: Well, the feeling of myself and the 
other Commissioner was that we -- I asked from the podium that 
staff take a look at this, come back in 60 days with a 
recommendation . 

I mean, this was something that was proposed by a 
Commissioner without -- there was no, at that time, any hard 
evidence, or filings, or complaints before us on this matter. 
And, so before we devote time and resources, we have a lot to do 
at the PUC . And before we devote time and resources on to 
hearings on whether there's affiliate abuse or not by the 
parent, there ought to be, I thought, some evidence. 

So, my suggestion was the staff, the Energy 
Division, come back in 60 days, look into this, and give us a 
recommendation. And I was ready to act. 

CHAIRMAN BURTON: Was that a substitute motion? 
Probably not. 

MR. PEEVEY: No, but it's all on audio system. 

CHAIRMAN BURTON: I mean, if you voted no because 
the time wasn't right for a decision, right, because we ought to 
have 60 days to look into whether we ought to look into it, 
really look into it, that would normally be a motion. 

Utilities still have the obligation to serve at 
just and reasonable prices in the state; right? 

MR. PEEVEY: Correct. 

CHAIRMAN BURTON: And that's the obligation the 
PUC, to see that's met? 



CHAIRMAN BURTON: You've shown support or stated 
support for the utilities investing in generation, and Path 15, 
and that . 

Does the Commission as whole or the President 
have the authority to order them to do something, to tell them 
to do something, hope they do it, or what? 

MR. PEEVEY: We have the authority to order them 
to do it if they choose not to. I would prefer to employ 
persuasion rather than the stick, but yes, we do. 

CHAIRMAN BURTON: Well, you do. And Path 15' s 
been waiting for a long, long time; right? 

MR. PEEVEY: Path 15 is going forward under 
federal auspices because we didn't move with dispatch. 

CHAIRMAN BURTON: And then they'll control it or 

MR. PEEVEY: Yes. That's regrettable, but if we 
punt, someone else will do it in this case. 

CHAIRMAN BURTON: When did they take it over? 

MR. PEEVEY: Well, what happened was that — 

CHAIRMAN BURTON: When did they make their move, 

MR. PEEVEY: Nine months to a year ago. Well, it 
was before that. Two years ago, the Secretary of Energy, 
Spencer Abraham, said Path 15 is going to get built, and it'll 
be built under federal auspices. And the state said, it ought 
to be built under state auspices. 

CHAIRMAN BURTON: The government didn't do 



MR. PEEVEY: I wouldn't say it didn't do 
anything. It just didn't move with the kind of speed that the 
feds did, which is ironic, to be frank. 

But what happened was that the DOE designated 
WAPA, which is the Western Area Power Administration, to go 
ahead on this thing. 

CHAIRMAN BURTON: For the rest of the Members of 
the Committee, I've got a couple more, but I'll try to be quick. 

When you talked to Senator Bowen ' s committee, 
you acknowledged some structural flaws in the loan structure 
that the PUC adopted to maintain direct access. 

How do you see those flaws remedied, assuming I'm 
correctly reporting your testimony? 

MR. PEEVEY: You are correctly reporting my 

And I committed in that testimony, and I 
committed before that, at the Commission actually, that by 
July 1 of this — no later than July 1 of this year, we adopt an 
interim decision on direct access. We'll take another look at 
this . 

I think that the cap, which is at 1.7 cents, is 
perhaps too low. It's the subject of more hearings. 

I think the interest rate by which customers loan 
money to direct access customers also should be higher. 

Those things will be resolved within the next 
four months . 

CHAIRMAN BURTON: You were going to take another 


look at DWR bond charges as they related to 130 base. That's 

MR. PEEVEY: Yes, that's up for rehearing. 

CHAIRMAN BURTON: Senator Johnson. 

SENATOR JOHNSON: Let me ask you a question about 
this filing with the FERC. 

I understand it's very lengthy, and that you 
haven't seen them all, under seal, and all the rest of that. 

But apparently, based on comments in the press 
and elsewhere, serious questions have arisen about the Los 
Angeles Department of Water and Power, and that they may have 
engaged in some of these activities, ricochet trading, Death 
Star, Get Shorty, and all these things. 

Assuming that that's the case, is the PUC and the 
State of California able to act on those kinds of abuses from a 
municipal utility without the FERC ' s involvement? Do we have to 
wait for FERC with respect to the Los Angeles Department of 
Water and Power? 

MR. PEEVEY: You may not have to wait for FERC, 
but the PUC has no jurisdiction over the Department of Water and 
Power, zero, zilch. 

SENATOR JOHNSON: I said the PUC or the State of 
California . 

MR. PEEVEY: The State of California, I mean, 
every entity, from charter cities to any other government 
entity, is subservient to the Legislature. I think that's the 
Constitution of California. They're creations of. 

I can't get into -- I don't know all the legal 


details of that, but you could obviously legislate as you 

SENATOR JOHNSON: Would it require legislation? 
If the State of California, if the Governor of the State of 
California is convinced that a public entity has ripped off the 
taxpayers and ratepayers of California, does he have to go to 
Washington, D.C. to look for some relief, or can he act, can we 
collectively act, directly? 

MR. PEEVEY: Well, presumably. I don't know if 
the Governor could act. I think Legislature could act, and 
subsequent to that, the Governor could act. 

But, I mean, you know, we have to -- I'm not an 
expert in constitutional law here, you know, in this regard. 
But I do know that the cities let alone — 

SENATOR JOHNSON: I don't mean to put you on the 
spot . 

But it just seems to me that one area where, if 
the ratepayers and the taxpayers of California have been ripped 
off, that we ought to be able to act without waiting for some 
federal action, it would be with the Los Angeles Department of 
Water and Power. 

MR. PEEVEY: Well, any municipal, for that 
matter. You could legislate, sure. No question. 

SENATOR JOHNSON: I'm very sympathetic to what 
you had to say about the parking issue and so on. So, this 
question is not really directed at you, and I apologize, but 
I've asked this question of a great number of appointees of the 
Governor . 


1 And the question, you indicated that you were 

2 unaware of the reporting requirements and the gift limitation, 

3 and so on. 

4 In the process of your appointment, did anybody, 

5 the Governor or anybody on the Governor's staff, talk to you 

6 about reporting requirements and what the law entailed? 

7 MR. PEEVEY: It is fair to say that ' additionally, 

8 that the attorneys at the PUC helped me prepare the Assuming 

9 Office Form 700, yes. 

10 SENATOR JOHNSON: I understand that. 

11 The question was, did the Governor or anyone in 

12 the Governor's office talk to you about those reporting 

13 requirements, and the need for strict compliance with them, and 

14 so on? 

15 MR. PEEVEY: I think Mr. Yamaki said, you know, 

16 that there are various rules and regulations that one has to 

17 follow. I don't remember the details of it, to be very frank. 

18 SENATOR JOHNSON: All right. 

19 I don't mean to dwell on it, but there seems to 

20 be a pattern of the Governor's people not talking to folks about 

21 that. And again, and again, and again appointees — 

22 MR. PEEVEY: Awfully obscure. 

23 SENATOR JOHNSON: It's obscure, but we have to do 

24 the same thing. People who win election in November, by 

25 December have to do those things. 

26 CHAIRMAN BURTON: Could I just say one thing? 

27 This is something that you may want to go back to 

28 the Governor's thing, but the reporting situation we're talking 


about here was post-taking office. 

And what they might do, assuming they do 
something, is talk about what you have to do on assuming office, 
and just don't think they'll fill you in going back. 

SENATOR JOHNSON: Yes, or they might not say 
anything at all, which is the thrust of my question. 

CHAIRMAN BURTON: Senator Romero. 


If it makes you feel any more secure, your 
Assembly Member has arrived. 

Let me ask you this. If I take a look at the 
letters supporting you, you've got quite a diverse coalition. 
You've got senior citizens, environmentalists, homeowners, labor 
groups . 

And then I take a look at some of the letters of 
opposition, including, actually, my former Assembly district 
committee executive board, 49th Assembly District. I see one, 
Consumer Actions Network, representing consumers opposing you, 
at least as far as the official letters. 

I read the letter here, and again, too, as we 
have spoken in the past as well, there are concerns as to 
whether or not you will advocate for consumers. I mean, the 
Public Utilities Commission was formed largely to protect and to 
promote consumer interest, the public's interest. 

Help me, since the time you appeared before us 
last July and we spoke about these issues then, to now, help me 
understand how you would counter some opposition to you, saying 
that you are anti-consumer? 


1 MR. PEEVEY: Well, I think I've voted as — I've 

2 been guided by my conscience, frankly, but I take seriously the 

3 responsibility of the Public Utilities Commission to look after 

4 the ratepayers' interests in California and to provide, as 

5 Senator Burton said, just and reasonable rates, or any other 

6 term equivalent to that, over a period of time. 

7 I've tried to comport myself accordingly and vote 

8 in such a manner. I don't think that I have knowingly voted 

9 against any consumer interest in that period of time. 

10 SENATOR ROMERO: You indicated at the beginning, 

11 you are a private individual. 

12 Part of me wonders, why would you want this 

13 position, especially President of this Commission? 

14 What do you hope to be your legacy? When people 

15 look back on you, What do you want to be your legacy as having 

16 been not only a member of the Commission but President? And 

17 especially from the vantage point of looking at consumers. 

18 MR. PEEVEY: Yes, well, I want to see us have 

19 stability and predictability in terms of rates, like we've had 

20 in the past. 

21 I want see a far more energy-efficient society in 

22 terms of our use of electricity and gas. There's many other 

23 functions we regulate, too. 

24 I want to see a, if I could put it this way, a 

25 greener California with a greater reliance on renewable energy. 

26 I think these are achievable things. And I want 

27 to see greater diversity in the Commission and amongst all those 

28 that it oversees. 



If those things could be my legacy, I would be 


CHAIRMAN BURTON: Senator Karnette had a 


SENATOR KARNETTE: Thank you, Senator Burton. 

I had a question when we were discussing what the 
PUC could and could not do about the municipalities that we 
think might have overcharged. 

I'm asking, do you feel that the PUC could 
recommend that we pursue this issue, or investigate it to see if 
there's any possibility? 

From you what you said, I gather the Legislature 
could follow up on this, and couldn't the PUC recommend that we 
do that? 

MR. PEEVEY: Well, yes, but we have no legal 
authority. I mean, listen, this is going in where lions fear to 
tread, because it's a very politically, you know, charged issue. 

But if you want to give us the jurisdiction over 
the munis in this area, we will accept it. 

SENATOR KARNETTE: No, I didn't say that. 
[Laughter. ] 

SENATOR KARNETTE: I didn't mean to say that. 

At the hearing on Friday, when we were in the 
Port of L.A., I just feel like if you felt like they should be 
investigated, it's like when I talk about any bureaucracy, they 
should let us know what's going on. Otherwise, we don't know. 

MR. PEEVEY: I agree. 


SENATOR KARNETTE: I mean, you would feel 
comfortable recommending that we look at this or not? 

MR. PEEVEY: I think we have to wait until the 
seal is removed on the FERC filing to get the extent of the 
charges of collusion, et al., between the municipal utilities, 
of which almost every major one in the state was mentioned, and 
the generators, and others in the state. 

I think we ought to be a bit cautious until we 
get the — until the seal is removed. That's going to happen, I 
believe, within ten days, hopefully within a week, and we'll 
have a far better notion of that here. 

We labor at the PUC at a disadvantage in a sense 
that a third of the — approximately a third of the electricity 
in California is provided by municipal utilities. And we really 
have no jurisdictional role in their lives whatsoever by law. 
And so, we really don't have the kind of insight by any means 
into them that we do into the investor-owned utilities. 

SENATOR KARNETTE: I think you've answered it. I 
had one other question. 

When you were talking about the problems we have, 
like we need more supply, we need larger supply, we need more 
pipes and such. You mentioned storage and the difficulties — 
I've been reading this in the binder. The storage is a 
problem. And a lot of that is stored down around -- a lot of 
the storage, you have the NIMBYs, and all that kind. 

Whose responsibility is it to make sure there is 
enough storage so we don't get a shortage of natural gas? Who 
do you think has that responsibility? I mean, it's a private 

entity, but -- 

MR. PEEVEY: It is, it is. But we have a 
regulatory role to play and a responsibility in it. For 
example, we approved last summer, on a contentious three-to-two 
vote, that the doubling of the natural gas storage facility, the 
project called Wild Goose in the Sacramento Valley. 

I mean, the whole idea -- and I responded to 
Senator Burton with this -- is to buy when it's cheap, store it, 
and when prices rise, you have it in the ground, and you're able 
to use -- 

CHAIRMAN BURTON: Sell it to somebody else at a 
profit . 

[Laughter. ] 

MR. PEEVEY: You don't want to go quite that far. 

This is my frustration. We have proved that. It 
took a three-to-two vote, and it was contentious. 

We approved just last week something called Lodi 
Gas Storage Project over in -- well, you know where Lodi is, 50 
miles south of here. That application had sat at the Commission 
for almost 18 months before we acted on it. There was no 
opposition to it. There were concerns, some concerns, about 
some affiliate relationships that could have come up in that 

We have to move with some dispatch on these 
matters. I mean, I think that just to let them sit for a long 
time -- 

CHAIRMAN BURTON: Well, some concern oh some 
affiliate relations, we're just finding out how much troubles 


were caused with affiliate relations. Those are valid concerns. 

MR. PEEVEY: No, and they vanished in the course 
of the process. I mean, the participants sold their interest in 
it. I mean, there was nothing there, and there was no complaint 
there . 

SENATOR KARNETTE: But I still don't understand 
what we can do? 

MR. PEEVEY: What we can do is approve those 
storage facilities so you can double or increase by 30-40 
percent the amount of gas you have in the ground. 

See, California imports 86 percent of its gas, 
approximately. Only 14 percent comes from within here in the 
state. We get it from Canada; we get it from the southwest. 

You want to buy it when it's cheap, and have that 
as a hedge. You want to have as much storage as you can 
possibly have. 

You can't compel someone -- we could compel, and 
we have the ability to compel PG&E, or Southern California Gas 
Company to expand their storage capacity. That's one way of 
doing it. 

We also need the ability to import more at any 
one time that's in the pipelines. I mean, this is another whole 
issue with El Paso Natural Gas Company. I mean, it's a 
historic one, goes back off and on for 40-plus years, where, you 
know, the state has sued them because of the feeling that they 
restricted the amount of the gas coming into California at the 
height of the electricity crisis to drive up prices. Then those 
prices were further reflected in higher electricity prices. You 


got a double whammy. This is all true. 

The only way to solve that is to have more of it 
coming in, and more storage within the state. 

CHAIRMAN BURTON: And not necessarily take the 
action they were going to do, to deregulate the natural gas 
coming in? 

In other words, there was a proposal before the 
Commission that got stopped, that I guess you were ready to do 
action on, and then people started figuring out that the record 
was fairly stale, and they did that. 

But for the fact, in my judgment, it would have 
cost a hell of a lot of money to the State of California through 
GSA purchases at a time we were broke, that would have gone 
through like something through a goose, and the normal 
ratepayers would have seen another little bump in their stuff. 

So, I think it's only, my judgment, only because 
there was a direct budgetary impact that kind of got people's 
attention, to get people's attention, that it got reopened. 

But what was the problem with the Wild Goose 
deal? Was it an environmental problem? Was it community 

MR. PEEVEY: No, there was neither of those. The 
Wild Goose already existed. This was a storage facility. This 
was a doubling of its size. 

The concern was that one of the principal 
suppliers and owners at Wild Goose is a Canadian company, and 
that in some way, that they could abuse that storage, the use of 
that storage facility to maximize their profits and all. 


It was -- frankly, I didn't follow it all the way 
through. I didn't think it was very logical. It was not -- 

CHAIRMAN BURTON: So, there's some way that they 
could have enlarged this storage, and it wouldn't have 
necessarily benefitted the ratepayers of the state? 

MR. PEEVEY: That seemed to be the allegation. I 
didn't -- it didn't seem to hold water, well, or gas. 

CHAIRMAN BURTON: That was the allegation. In 
other words, if it was approved, were the safeguards in there to 
say, if we're enlarging storage facilities in California, that's 
what they're for? 

MR. PEEVEY: Yes, there were. 

CHAIRMAN BURTON: And that restriction came in as 
part of the approval and wasn't necessarily something that was 
there while it was sitting on somebody's table? 

MR. PEEVEY: They agreed to meet our affiliate 
rules in their responses. 

CHAIRMAN BURTON: Initially their proposal did, 
or after the Commission kind of held, if not their feet to the 
fire, held them up for a while? 

MR. PEEVEY: Their feet to the fire. 

CHAIRMAN BURTON: In other words, it's like 
there's a criticism of the Commission not going too fast on some 
things, but the fact that when they went, in other words, there 
was some stuff in the way that, if they'd approved it as asked 
for, it would have benefitted the companies and not us. 

MR. PEEVEY: That's true. 

CHAIRMAN BURTON: But of course, they can get to 


that earlier also. As they walk in the door, somebody could 
say, "Fine, you do this; we'll do that." 

It happens in our process all the time. When 
somebody wants you to vote for a bill you don't want, you can 
tell them up front, "Well, if you take this amendment I'm fine 
with it," and it doesn't necessarily have to wait for Third 

Senator Knight. 

SENATOR KNIGHT: After all of that, I was just 
going to ask what your assessment was of our position this 
summer with capacity? 

MR. PEEVEY: You mean on electricity? 


MR. PEEVEY: Well, I think that — here's the way 
things stand as of March 5th is, the snow pack in the Sierra is 
below normal, not by a big margin, but it's like it's between 
the 85 and 90 percent of normal. 

We have another month to go before we do the 
final snow pack measurement and the water content of the snow, 
which is a critically important matter for knowing what kind of 
hydro resources we'll have in California for the late spring and 
early summer. 

However, there are drought conditions in the 
Pacific Northwest. And we import a lot of electricity in the 
summer from the Pacific Northwest, much of it from Bonneville 
Power Administration. If they don't have enough snow, they 
don't have enough hydro. If they don't have enough hydro, the 
prices go up, and we have a shortage situation. 


We won't know the dimensions of that, just like 
we don't know in California for approximately another month to 
six weeks. It could be a serious problem this summer. If so, 
we're going to have to have another, I think, major energy 
conservation effort like we had in the summers of 2001 and 2002. 

It's a little premature to say that. And I look 
to the -- the Energy Commission collects a lot of this data, as 
does CDWR, but I think we should be on notice that we could have 
some problems this summer. 

SENATOR KNIGHT: Is there any way that we can get 
a handle on that early, a forecast so to speak, to just say, you 
know, we need to do something now, because this is the kind of a 
problem we're going to have? 

MR. PEEVEY: It's starting to look like that in 
the Pacific Northwest. I think that's true. 

Although again, I think that the actual reading 
of all this does wait approximately another month as the time in 
which we do that. 

SENATOR KNIGHT: I guess the point being that we 
don't want to wait until it gets to be a full-blown crisis 
before we understand or take any action. 

MR. PEEVEY: I agree. 

SENATOR KNIGHT: One other question. 

We've talked about gas storage around. I've 
heard of proposals to bring gas down from Alaska in a liquid 
form. Freeze it and bring it down in big boats. And that it 
would be economically feasible. 

Has there been any thought about that? Have you 


looked at it from a business standpoint? 

MR. PEEVEY: It's called liquified natural gas. 
And there are proposals to bring liquified natural gas to 

We went through this once in the late '70s, and 
this Legislature passed a special bill in 1977 to site a 
liquified natural gas -- to give the Public Utilities Commission 
the responsibility of approving and siting a natural gas -- 
liquified natural gas receiving terminal at Point Concepcion in 
Santa Barbara County. 

By the time we did the process work, all around 
the markets had changed, and it didn't become -- it was not 
financially viable. 

There are proposals again to site a liquified 
natural gas facility in Los Angeles Harbor, to bring the gas 
from Indonesia. Whether it is economic or not — 


MR. PEEVEY: From Sumatra. 

CHAIRMAN BURTON: I was just talking about the 
Brown family's oil thing. 

MR. PEEVEY: Pertamina. Pertamina is the 
National Oil Company, and they had name similar to that. 

In any case, there are some proposals like that. 

And there 're also proposals to build a liquified 
natural gas terminal in Baja California and pipe it up into 
Southern California. 

Whether these things are economically feasible or 
not, I don't know. 


SENATOR KNIGHT: Would it be possible for 
California to make a deal with Alaska, which would be more of a 
state-to-state negotiation? 

MR. PEEVEY: Theoretically yes. 

Actually, it's a little known fact, but Alaska 
exports liquified natural gas today to Japan. Has for 25 years, 
It's a byproduct of the Alaskan pipeline that comes down from 
Prudhoe Bay. And at the time, nobody in California wanted that 
gas because it was too highly priced, so the Japanese took it, 
and it goes to Japan under a long-term contract. 

CHAIRMAN BURTON: One last question. 

Shouldn't all those DWR long-term contracts take 
care of a lot of this summer stuff? 


CHAIRMAN BURTON: Do you want to introduce 
anybody here? 

MR. PEEVEY: I'd like to introduce my wife. I 
understand she arrived. She's taken with Jack Scott. 

CHAIRMAN BURTON: Welcome, Carol. 

CHAIRMAN BURTON: We'll take a short break for 
the court reporter. 

[Thereupon a brief recess 
was taken. ] 

CHAIRMAN BURTON: Just a couple questions on 
telecommunications . 

An issue came up, and I don't know even know 
whether you guys dealt with it, deal with it, or what. But 
let's go back six months so I could say right now that AT&T was 


allowed their long distance company but also could do local. 

MR. PEEVEY: Correct. 

CHAIRMAN BURTON: But the local company, Pac 
Bell, could do local and not long distance. 

MR. PEEVEY: Right. 

CHAIRMAN BURTON: Then there was something before 
the Commission that allowed them to go into long distance? 


CHAIRMAN BURTON: Where is that? 

MR. PEEVEY: It was approved on December 30th. 

CHAIRMAN BURTON: It didn't make any sense to me. 
It was always what was sauce for the goose. 

MR. PEEVEY: There was a staggered period. We 
approved one in September and the other not until December 30th. 
And frankly, it could have gone another few months. 

CHAIRMAN BURTON: Do you think the local 
telephone market's competitive at all today? Probably not. 

MR. PEEVEY: Local telephone market. 

CHAIRMAN BURTON: Whatever that is. 

MR. PEEVEY: Well, the reason one hesitates, 
there's so many pieces to it now with cell phones and 
everything. You know, technology's gone by so fast in this 
thing, it's kind of outstripping some abilities to regulate. 

CHAIRMAN BURTON: Just respond to this. Do you 
think it would be a prudent investment for a businessman to get 
into the pay phone business. 

[Laughter. ] 

CHAIRMAN BURTON: And then want to be Governor 


of the state 

MR. PEEVEY: In 1962. 


Witnesses in support, and let's be brief. 

MR. CARTER: I shall be brief, Mr. Chairman. 

Art Carter, representing the Coalition of Utility 


We are here in support today of Mike Peevey, 
someone whom I've known probably second longest in the room to 
anybody, except for you, Mr. Chair. 

Senator Romero, I picked up on your comment about 
some of those who are opposed to Mr. Peevey. I actually first 
heard Mike Peevey in his capacity as a labor economist for the 
California Labor Federation, appearing before the California 
PUC, arguing that the general rate case proceeding of PG&E at 
the time was allowing too high a profit margin for them. 

Now, those who are detractors may argue that that 
was a long time ago. 

We support Mike Peevey not simply because of his 
history. I've known him as a labor economist, as President of 
the Southern California Edison Company, and as someone who 
started his own company. 

In my view, Mike Peevey is probably best 
qualified to understand every stakeholder group that comes 
before the PUC, having had direct experience in a number of 
different ways. And someone of his experience, and his age, and 
I would argue wisdom, I think, is one who knows that he's going 
to be closely watched by ratepayer groups, consumers, and others 


as to whether or not his previous work experience is one that is 
biasing in some fashion or not. 

We support Mike Peevey because we hope the 
Commission under his leadership will address some issues such as 
system reliability, ratepayer fairness. Those are the kinds of 
things that he brings to us. 

I don't speak simply here on behalf of the unions 
who happen to be employed by the investor-owned utilities, but 
also because many thousands of union members are also 
ratepayers. So, in our view, he, by virtue of his experience, 
brings real assets to be able to determine whether or not a 
proceeding, whether it's general rate case of any of the 
utilities under the PUC ' s jurisdiction, or any other group, is 
trying to snowball the Commission. I think he has that kind of 

So, on behalf of CUE, I would hope that the Rules 
Committee would give him a do pass and support. 

Thank you. 

CHAIRMAN BURTON: Questions of the witness? 

Next . 

MS. BERRIO: Good afternoon, Senators. Itzel 
Berrio on behalf of the Greenlining Institute. 

The Greenlining Institute is a consumer advocacy 
group with 39 members, which include minority business 
organizations, faith-based organizations, community groups, and 
immigrant service groups. 

We are here because we strongly support 
Commissioner Peevey 's appointment today. 


We do have some concerns, however, regarding the 
appointment process and the impact on the Commission's ability 
to address the concerns of the poor and minorities. 

Governor Davis has made six appointments to the 
Public Utilities Commission. All of these appointments have 
been white. This is true despite strong concerns expressed by 
the Greenlining Institute, Latino Issues Forum, and scores of 
other minority groups. 

Our second concern is that the PUC, until very 
recently, has been either unconcerned or uninterested with the 
problems of the poor, senior citizens, new immigrants, 
minorities, and other underserved communities, or has been 
ineffectual in addressing their problems. 

Greenlining strongly supports Mr. Peevey's 
confirmation because we believe that he has the skill and the 
commitment to lead this Commission in a way that will restore 
confidence, not only in underserved communities, but also among 
utility companies. Greenlining first worked with Mr. Peevey 
when he was Executive Vice President of Edison, and in that 
capacity he showed a strong commitment to diversity in the 
workforce, including at top management, and to supporting 
utility policies that would protect the interests of the poor. 
This commitment and effectiveness has been demonstrated, albeit 
under different circumstances, during his nearly one year as a 
Commissioner and his very brief stint as President of the 

Another concern of ours is the fact that the CPUC 
is underfunded and understaffed. As such, it cannot do a good 


job, much less an excellent job in this era of deregulation and 
increasing corporate irresponsibility. 

In the past, we have not supported additional 
funding to CPUC because we questioned either its commitment or 
its effectiveness. We would hope that, however, if President 
Peevey and the Commission can demonstrate over the next year 
that they truly can make a difference, particularly among 
vulnerable populations, that the Legislature substantially 
increase the CPUC's budget, much as President Bush has almost 
doubled the budget of the SEC. 

Finally, in supporting the confirmation of 
President Peevey, Greenlining must raise one of the great 
concerns of Greenlining and consumer groups generally, and this 
is the raising of the public interest standard in all important 
CPUC proceedings. President Peevey has committed to doing so, 
and for this we applaud him. 

There is one aspect of public interest, and the 
jury is still out on this issue. This is regarding the 
relatively trivial slap-on-the-wrist penalties to utilities that 
engage in egregious fraud. Unfortunately in the CPUC's history, 
most large corporations receive penalties, even for the most 
egregious conduct, that amount to less than one day's revenue, 
and in some cases, less than one hour's revenue. This body may 
wish to inquire. 

But for the above-stated reasons, and for 
Mr. Peevey 's commitment, we do support him in his confirmation 

CHAIRMAN BURTON: Thank you very much. 


1 Next. 

2 MS. IMAI: Good afternoon. My name is Lindsay 

3 Imai with the Greenlining Institute, but I'm here reading a 

4 statement on behalf of Darlene Mar, who is the Chair of the 

5 Asian American -- the Council of Asian American Business 

6 Associations. 

7 "As Chair of the Council of 

8 Asian American Business Associations, 

9 I have witnessed the California Public 

10 Utilities fail the minority business 

11 community, especially under the 

12 leadership of the past two CPUC 

13 Presidents. In testifying before them, 

14 and even if we had the fortune of 

15 meeting with them, we have been ignored, 

16 disappointed by the lack of responses to 

17 our issues, and not taken seriously. 

18 "As a commission with staff who 

19 is set up to protect Californians yet 

20 excludes minority businesses, it is not 

21 the type of public platform that the 

22 CPUC should be noted for. Indeed, it 

23 is only by your action, Senators, that 

24 the CPUC has done anything to support 

25 us . 

26 "Fortunately, our limited exposure 

to President Michael Peevey indicates 
that he is sympathetic to our issues. 


Furthermore, we are very aware of his 
stated commitment to diversity. We 
anticipate his assurance to our 
communities will bring about important 
changes at the CPUC. For these reasons, 
we support the confirmation of President 
Peevey . 

"We also want to mention that no 
Asian American has ever sat on the 
Public Utilities Commission, and only a 
few, if any, have sat on their committees. 
It is disgraceful to have a California 
commission whose commissioners do not 
represent the diverse population of 
Calif ornians . We feel that such an 
appointment is long overdue. We hope 
that in confirming President Peevey with 
our support, you will also record this 
Thank you. 

CHAIRMAN BURTON: Thank you, ma'am. 

MR. PHILLIPS: Hello, my name is Mister 
Phillips, and Mister is my first name. I'm an associate with 
the Greenlining Institute, and I'm here to read a statement on 
behalf of Dr. J. Alfred Smith, the Senior Pastor at Allen Temple 
Baptist Church in Oakland. 

Dr. Smith says, 


1 "I regret that I could not be 

2 here personally with members of my 

3 church to discuss our views of the 

4 CPUC and the role of President 

5 Michael Peevey. 

6 "I am the Pastor of Allen Temple 

7 Baptist Church of Oakland. Our 

8 membership consists of over 5,000 

9 families, primarily low and moderate 

10 income African Americans. 

11 "Our church members, including our 

12 Seniors, have come before the CPUC on a 

13 number of occasions and have been 

14 disappointed. One example was when 50 

15 of our Seniors, on their own, came to 

16 the Public Utilities Commission to 

17 protest a possible rate increase by 

18 PG&E during the energy crisis. Our 

19 members were greeted by eight highway 

20 patrolmen, and the Commission would 

21 not even allow us into the large 

22 hearing room to testify. 

23 "From what we have discovered 

24 from Greenlining, President Peevey will 

25 be different. We hope so." 

26 Doctor Smith would like to close with a small prayer: 

27 "May Mr. Peevey be confirmed as 

28 President of this Commission most 


mighty and important body. May he 

remember those who rely upon him, 

need him, and have supported him. 

May he carry out the teachings of 

Jesus, and may he not forget the 

least among us. In Jesus' name, 


"Prayerfully, Dr. J. Alfred 
Smith, Senior Pastor." 
Allen Temple Baptist Church. 

CHAIRMAN BURTON: Thank you, sir. 


MR. LYONS: Senator and Members, Joe Lyons with 
the California Manufacturers and Technology Association. 

CMTA Supports the confirmation of President 
Peevey based on his thoughtful approach to issues, his years of 
experience, and when it comes to the weighty and complicated 
issues that are before the Commission, there's no substitute for 
experience, and his hard work at the Commission putting together 
-- putting the pieces back together, again, after the crisis of 

With President Peevey, we may not always agree 
with him, but at least we know we're going to get a fair 

Thank you. 

MS. BERGUM: Good afternoon, Mr. Chair and 
Senators. My name Shelley Bergum. I'm the Executive Director 
of the Deaf and Disabled Telecommunications Program, which is a 


program of the Public Utilities Commission to provide 
specialized telecommunications equipment and services to people 
who are deaf and people who are disabled here in California. 

Through our program we provide specialized 
telephone equipment to about 500,000 deaf and disabled people 
here in the state, and through the California Relay Service, we 
relay about 7 million telephone calls a year for people who are 
deaf and hard of hearing. 

In Mr. Peevey's short term on the Commission so 
far, we have had the opportunity to work with him on a number of 
issues related to our program. And we have found him to 
exemplify one of the most important qualities of leadership, and 
that is the ability to listen to people who know more about the 
issue at hand than he does, and the ability to learn from the 
expertise and the experience of individuals who have been 
involved in that issue. 

We've been impressed with Mr. Peevey's ability to 
learn quickly about the issues which are important to our 
community, and then to move forward and make credible, informed 
decisions based on the knowledge of others which he has taken 
the time to learn. We have had experience with few other 
Commissioners who have taken this opportunity to learn as much 
as about our program as Mr. Peevey has. 

So, on behalf of my program and on behalf of the 
three consumer-appointed committees which govern our program, 
I'd like to heartily endorse the confirmation of Commissioner 
Peevey and hope you vote to take that action today. 

Thank you very much. 


CHAIRMAN BURTON: Thank you very much, ma'am. 


MR. WHITE: Mr. Chairman, Members, I'm John 
White. I'm here on behalf of the Center for Energy Efficiency 
and Renewable Technologies, and also the Natural Resource 
Defense Council, Environmental Defense, and Union of Concerned 
Scientists, who couldn't be here but asked me to say a word. 

We have found that Mike's tenure on the 
Commission has gotten better as it's gone, and that in the last 
several months he's managed to answer some questions in a very 
strong and affirmative way about his commitment to both the 
environment and to renewables. We think that he has got us on 
the right track in implementation of things the Legislature has 
asked the Commission to do in the environmental area. 

We think he also is savvy enough and experienced 
enough to get the utilities, when needed, to listen and to act 
in the public interest. That's a very important part of the 
job. And we think that he is the person to hold folks 
accountable . 

I think we have found he's also been accessible. 
We also think his knowledge and his history as on display this 
afternoon, taking us back to some of the crises that have 
recurred, unfortunately, in our state's history, gives him a 
unique ability to be the guy at the right time to do things that 
we need to do. 

The Energy Action Plan that he has brought forth 
with his colleagues at the Energy Commission and the Power 
Authority begins us on the road to getting a plan of where we're 


1 going to go. 

2 We don't always agree with him, and we sometimes 

3 have strong arguments, but we also think that his command of the 

4 subject and his dedication to public service commends his 

5 appointment. We urge an aye vote. 

6 CHAIRMAN BURTON: Thank you. 

7 MR. PLOTKIN: Mr. Chairman, Senators, Norman 

8 Plotkin, representing the Alliance for Retail Energy Markets. 

9 I'd just like to echo the remarks earlier about 

10 President Peevey's unique qualifications and recommend an aye 

11 vote on his confirmation. 

12 CHAIRMAN BURTON: Witnesses in opposition? 

13 MR. GOLDBERG: Lenny Goldberg on behalf of TURN. 

14 We are here to express concerns. Traditionally 

15 we have never taken positions for or against Commissioners. We 

16 appear in so many different proceedings on so many different 

17 issues that we're sure we disagree and agree, depending on -- 

18 CHAIRMAN BURTON: This is a concern? 

19 MR. GOLDBERG: A concern as opposed to an 

20 opposition. 

21 I want to put forward, residential customers have 

22 experienced substantial electric rate increases starting in 

23 2001. And we are very concerned about the direction of the 

24 Commission with regard to residential, and where residential 

25 rates are going, and a quote-unquote, "business friendly 

26 commission" which will cost residential customers potentially 

27 billions of dollars. 

28 With regard to the failure to end the direct 


access exodus, Commissioner Peevey has voted not to suspend 
direct access retroactive to July 1st. And we think that the 
current artificially low exit fee of 2.7 cents is asking for a 
massive loan from small ratepayers, from all ratepayers, to pay 
for the exit fees of direct access customers. And in fact, 
because of the so-called loan, will take something close to 20 
years to be paid back. We doubt the Commission will follow 
through with that, and we believe that other, whether it's small 
business or other residential ratepayers, are as a result being 
obligated to pay for the costs of direct access, which should 
have had the plug pulled and should pay the full costs that are 
being left behind with ratepayers. 

We're concerned about asymmetrical treatment when 
we look at baseline expansion. The question is, is that just 
going to be -- will that be paid for by residential classes? 
Well, if residential classes are paying for direct access and 
their costs, we need to see a real consistency of treatment 
here . 

We have -- we are very — 

CHAIRMAN BURTON: How would baseline expansion, 
going to hurt the residential — 

MR. GOLDBERG: It's typically been in — the 
question is whether those costs are paid broad -- if we are 
paying costs of other classes, the question is whether the 
asymmetrical -- will baseline — will any of baseline expansion 
costs, are they staying within the residential class, or will 
those be spread to — throughout the customer classes? 

CHAIRMAN BURTON: Baseline definition? 


MR. GOLDBERG: Baseline expansion, higher 
baseline amounts being allowed depending on climatic conditions, 
therefore lower revenue coming in from those customers. 

CHAIRMAN BURTON: Is there not something in 
statute right now, 130 percent of baseline? 

MR. GOLDBERG: That is correct, and one of -- 

CHAIRMAN BURTON: So, that part can't go up 
without statutory changes. 

MR. GOLDBERG: That is correct. Although, we 
were opposed to a decision that allowed the bond costs — 

CHAIRMAN BURTON: I understand that. 

MR. GOLDBERG: Okay, that's on the 130 percent of 

CHAIRMAN BURTON: Passing the bond surcharge end 
of that, on which we had a discussion with President Peevey 
yesterday, Senator Bowen and I. And he has pledged to review 
that because we have expressed a concern about that issue there, 
that then you get the definitions and lawsuits, whether it's a 
rate or whether it's a charge. 

MR. GOLDBERG: Right. Well, that is one of the 
pieces we're talking about. 

CHAIRMAN BURTON: That type of thing. 

MR. GOLDBERG: I'll leave it at that. That's 
right in terms of additional impositions on baseline. 

The SDG&E $130 million, the proposed ALJ decision 
required SDG&E to credit $130 million to customers. 

Mr. Peevey 's alternate changed that view, and the 
$130 million at about $50 per residential customer obligation 


was imposed. We know there's a lot of discussion of the SDG&E 
settlement, and we think that had the ALJ decision been followed 
instead of Mr. Peevey's alternate, the residential ratepayers in 
San Diego would have saved $130 million. We thought that was an 
unfortunate decision, and our concern is, is there a trend in 
these decisions that -- such as the bond decision on the 130 
percent of baseline, that has a -- that could cause problem for 
our residential customers. 

Another major issue that could cost residential 
customers billions of dollars is the real-time metering issue. 
Potentially, we think that -- it's our understanding that 
Commissioner Peevey wants to champion these advanced metering 
technologies. For businesses that may be fine. We've done some 
analysis of it and find for — particularly for lower income 
ratepayers, seniors, renters, requirements for advanced metering 
costs will cost billions of dollars. Very, very difficult to 
find any of the savings in the shifting. You know, we 
understand the overall question of shifting the use of power 
from peak times, but a mandatory metering program for 10 million 
residential and small commercial customers would cost between 
$6-8 billion. And on small ratepayers, we very much question 
the benefit of that, and I think that's probably — it's 
certainly an honest disagreement with Mr. Peevey, but we think 
it's an unfortunate push onto small customers where we don't 
think the benefits will be warranted. 

SENATOR JOHNSON: There's no rush in going 
forward with it. 

MR. GOLDBERG: We're looking at a long — 


SENATOR JOHNSON: You have now in the works a 
test, a pilot test? 

MR. PEEVEY: Yes, yes, that's it. 

SENATOR JOHNSON: You're not proposing to apply 
this to 10 million residential customers? 

MR. PEEVEY: No, we are not. The only thing that 
the Action Plan, the Draft Action Plan of the three agencies 
says is to implement a voluntary program to reduce peak demand 
for business. That's it; that's all there is. 

MR. GOLDBERG: Well, for business, we're fine 
with that. As I said, I think this is maybe an honest 
disagreement with the direction we would be going in, but we 
would, you know, strongly disagree with that direction. 

SENATOR JOHNSON: You're reticent about it. 


I mentioned the bond charge. 

And then the questions of gas, Southern 
California Gas is unbundling. We do think there are problems 
with that. That's an ongoing proceeding. We have not seen the 
benefits, and I think, again, we may have a disagreement with 
Mr. Peevey about the direction of that proceeding. 

I think I will leave it there. I think there's a 
number -- the general and overall concerns are in the effort 
to -- that we may see a commission, and this has been a regular 
and much-expressed concern: a commission that is more 
interested in the financial position in the markets of the 
utilities and the responsiveness to large customers than it is 
putting forward the interests of small customers. And that will 


be an ongoing concern on this Commission. 

CHAIRMAN BURTON: Do me a favor. Go back to the 
one, the concern before SDG&E. 

MR. GOLDBERG: Well, the SDG&E — 

CHAIRMAN BURTON: No, no, before that. You 
raised an issue that I was going to ask a question about, and I 
can't remember what it was. 

MR. GOLDBERG: The real-time metering. 


MR. GOLDBERG: The bond charge on the 130 percent 



CHAIRMAN BURTON: No, we dealt with that. Before 

Why don't you give me your statement. When the 
other guy comes up, I'll find it. 

MR. GOLDBERG: Direct access. 

CHAIRMAN BURTON: No, I'll find it. 

Why don't you come on up, then I'll have some 
questions . 

MR. HELLER: Thank you, Mr. President, Members 
of this Committee. 

My name is Douglas Heller. I'm the Senior 
Consumer Advocate with the Foundation for Taxpayer and Consumer 
Rights . 

As you know, Members, and discussed earlier, the 
California Code of Regulations states in its conflict of 
interest disclosure section that no member of a state board or 
commission, and no designated employee, et cetera, shall accept 


gifts with a total value of more than $340 in a calendar year. 
It had been 320; it is now, under the current rules, 340 from 
any single source. 

On Monday, however, Mr. Peevey disclosed in his 
Statement of Economic Interest that he had, as you know and has 
been discussed, illegally accepted more than $2,000 free parking 
at the San Francisco Airport. Which, as a side note, though 
unrelated to the conflict rules, the CPUC has certain regulatory 
authority over the airport. But regardless of the source, with 
limited exceptions, a Commissioner simply may not accept gifts 
of such a size. 

Mr. Peevey, according to an addendum attached to 
the filing, stated that he was unclear about the rules governing 
conflicts of interest. 

This is simply unacceptable. This is not an 
excuse. If you violate the law, you have violated the law. 
That's why we have these laws. 

And Senator Johnson discussed earlier the 
question of education for people that are new hires or new 
appointees. We simply believe that you have an obligation if 
you are a servant of the public to fulfill the rules, to uphold 
the law, and abide by the law. 

But even if Mr. Peevey had questions about 
whether or not he was allowed to accept such gifts from an 
entity, and if he had such questions, the CPUC, as I think you 
all know, has an ethics staff in the CPUC Legal Division to 
which he should have turned. 

Furthermore, there was an ongoing investigation 


at the -- excuse me, there was an ongoing investigation into the 
illegal stock holdings. In fact, a lawsuit against a former PUC 
Commissioner, Mr. Henry Duque. And as a result, Mr. Peevey 
should have been well aware that there are conflict of interest 
statutes that apply to Commissioners. 

And finally, the conflict of interest rules of 
the State state very clearly that any designated employee who is 
unsure of his or her duties under this code may request 
assistance from the FPPC. 

Now Mr. President, last year this Committee 
considered Mr. Peevey' s nomination, and I spoke to a variety of 
issues at that hearing as well. But this Committee did not 
recommend such confirmation, as there were outstanding — 

CHAIRMAN BURTON: It was not a hearing — it was 
to recommend it. 

MR. HELLER: Fair enough. I don't mean to imply 
that it was something else. 

CHAIRMAN BURTON: It was a public hearing to get 
certain things on the record, and to let Mr. Peevey know of what 
some of our concerns would be going forward. 

So, I mean, he wasn't denied or given anything, 
just for the record. 

MR. HELLER: For the record, and that is what I 
meant to imply. I apologize if I didn't. 

But I would like to say that at least in our 
organizational opinion, perhaps in yours, perhaps not, 
Mr. Peevey was, at least in some respect, in a probationary 
position until now, that there was going to be an effort by the 


public, certainly by the Senate, to review his work and to 
ensure over the last eight month — over this eight-month period 
that Mr. Peevey was sufficiently independent of a variety of -- 
sufficiently independent to serve as a Commissioner. 

Now, as you know, prior to his work on the 
Commission, Mr. Peevey ran a direct access-related energy firm. 
As the Commissioner just indicated, Mr. Peevey has been an 
advocate of policies directly affecting direct access companies. 

There was mention of real-time metering, and as 
discussion has indicated, Mr. Peevey has been an advocate of 
real-time pricing. 

We think that the wall between Mr. Peevey and his 
past employment is simply not high enough. To use Mr. Peevey' s 
words, he was and is high up enough in his professional career 
to see over the wall. 

But it was most surprising to us to read not 
Monday when the filings were due, but not until late yesterday 
when we finally were able to get these Form 700 filings, we were 
just absolutely surprised that Mr. Peevey would accept illegal 
gifts, such as those received from SFO. A public servant's 
duty, as I said, is simply to uphold the law and abide by the 
law. And the public trust is the chief currency of public 
employees. And this behavior simply doesn't cash out. 

So in conclusion, Mr. Peevey has not demonstrated 
the independence the public needs of a Commissioner, indeed, the 
President of the PUC. He has instead just demonstrated a 
disregard for the law, which is nothing less than disrespect for 
the people of California. Simply put, the public is sick and 


tired of officials who come into office and disregard the law, 
who accept gifts that they shouldn't be accepting. It is not 
what we expect of the people in office and the people appointed 
to office. 

It would be, in our view, inappropriate to allow 
Mr. Peevey to continue as a Commissioner, and we urge you to not 
recommend his confirmation to the full Senate. 

Thank you for the opportunity. 

CHAIRMAN BURTON: Just to get back on the record 
on dealing with the direct access exit fees, they're going to 
reopen the record? They're going to re-hear that — 

I don't need you. I've got the written document, 

[Laughter. ] 

CHAIRMAN BURTON: I was asking the Commissioner. 
So, that's an affirmative answer. 


CHAIRMAN BURTON: Do you want to comment, and you 
discussed this briefly in a meeting with Senator Bowen and I 
about, as you called it, a forced loan, the direct access stuff 
between the cap and the cost as a forced loan, that would cause 
ratepayers now, in all probability, to forego a rate decrease? 

MR. PEEVEY: No, it would limit. It would limit, 
but it would not forego. 

CHAIRMAN BURTON: It would forego rate decrease 
they would get but for the forced loan? 

MR. PEEVEY: That's right. 

CHAIRMAN BURTON: And that'll be made up to them 



MR. PEEVEY: That's the point of charging an 
interest rate, so that they would be indifferent to it. In 
other words, they get back enough money on interest to 

But this doesn't, you know -- that's the way it 
works . 

CHAIRMAN BURTON: Unless you happen to die before 
loans are paid. 

MR. PEEVEY: Right. 

CHAIRMAN BURTON: Would it go to the heirs? 

MR. PEEVEY: It would go to the contingent -- 

CHAIRMAN BURTON: Contingent fund. 

On the San Diego, the issue raised on San Diego 
Gas and Electric, you voted. What was your reasoning on your 
vote to ignore the ALJ's decision? I think this was discussed 
yesterday, but I can't remember. 

MR. PEEVEY: Well, it was the recommendation of 
the legal staff of the Commission that a settlement be entered 
into with San Diego because the risk of ratepayer loss if a 
lawsuit, which San Diego had filed in federal court, if that 
lawsuit was successful, the risk of loss to San Diego ratepayers 
would be in the hundreds of millions of dollars. 

So, it was recommended by the General Counsel and 
by Larry Chasset, who's Assistant General Counsel, that a 
settlement be reached between San Diego and the Commission that 
would forego that lawsuit, and that's what I voted for. 

CHAIRMAN BURTON: So, the ALJ guy didn't know what 


he was doing, or what? 

MR. PEEVEY: I wouldn't say he didn't know what 
he was doing. Opinions differ. The best legal advice that we 
could get, and there were the majority of us, was that the 
Commission was better served, and the public better served in 
San Diego by having a settlement rather risk it all in a 
lawsuit . 

CHAIRMAN BURTON: What were you going to risk in 
a lawsuit? What would have happened if they won? 

MR. PEEVEY: About $300 million would have gone 
from ratepayers to San Diego shareholders. 

CHAIRMAN BURTON: I wanted to mention this to 
Lenny, but he left. 

But as I remember the so-called real-time 
metering, we talked about that during the last energy crisis as 
a way to try to get people off — you know, give them cheaper 
stuff off peak hours. 

MR. PEEVEY: You have a bill that passed last 
year . 

CHAIRMAN BURTON: I understand that. I was 
absolving you of that issue. 

[Laughter. ] 

CHAIRMAN BURTON: Just in closing, and I had 
this discussion with Commissioner Peevey a couple times 
privately, but to put it on the record, some of the concerns 
expressed are concerns that I have with the direction of the 
Commission, going back to the Governor's State of the State 
Address, where he was going to direct this group and that group 


and the Commission to do everything possible to further the 
business climate in the state. Which may be fine, but if they 
furtherer it at the expense of small businesses and residential 
customers, it wouldn't be, in my judgment, the right thing. 

As I said, 35 years of knowing Mr. Peevey, and 
the letter that I sent him when I asked him questions, I said, 
when he thinks about himself as having worked for a utility, 
remember his days when he worked for the State Federation of 
Labor, so we can reach deep into our memories for the issues. 

But it is my intention to support the nomination. 
It's also my intention to watch, keep an eye on the actions of 
the Commission. And it is my intention that if we see things 
that, you know, not just are differences in judgment between at 
least myself or other Members of the Legislature and Commission, 
it'd be one thing. But if we see things going far afield I'm 
more than willing to take money out of the budget, put it into a 
bill with some statutory changes in it. 

We may want to do some statutory changes of some 
of the things that came up here regardless. 

With that, I would move the nomination. 

SECRETARY WEBB: Senator Karnette. 


SECRETARY WEBB: Karnette Aye. Senator Knight. 


SECRETARY WEBB: Knight Aye. Senator Romero. 
Senator Johnson. 


SECRETARY WEBB: Johnson Aye. Senator Burton. 



SECRETARY WEBB: Burton Aye. Four to zero. 

CHAIRMAN BURTON: Congratulations, Michael. 

MR. PEEVEY: Thank you. 

CHAIRMAN BURTON: Oh, and just one other thing 
for Doug Heller, I guess. 

If the FPPC finds him in violation, that's what 
they issue fines for. And just for your edification, always 
could have bought down if you'd thought of it, which you didn't 

MR. PEEVEY: I know, but what I found out was, 
there's no one time I parked there that was — 

CHAIRMAN BURTON: No, you could buy down the 
value of the gift. 

MR. PEEVEY: I could have paid it back, but you 
can't pay it back. You have to pay it back within 30 days. I 
found that out last week. 


[Thereupon this portion of the 

Senate Rules Committee hearing 

was terminated at approximately 

3:30 P.M. ] 

--00O00 — 


I, EVELYN J. MIZAK, a Shorthand Reporter of the State 
of California, do hereby certify: 

That I am a disinterested person herein; that the 
foregoing transcript of the Senate Rules Committee hearing was 
reported verbatim in shorthand by me, Evelyn J. Mizak, and 
thereafter transcribed into typewriting. 

I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

IN WITNESS WHEREOF, I have hereunto set my hand this 

/ day of '/yi^&LcX^ 2003. 

EVELYN J. 441 ZAK~^ 
Shorthand Reporter 


Additional copies of this publication may be purchased for $4.50 per copy 
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Senate Publications 

1020 N Street, Room B-53 

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471 -R 










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2 _ Reported by: 



1:34 P.M. 


Evelyn J. Mizak 
Shorthand Reporter 















GREG SCHMIDT, Executive Officer 

PAT WEBB, Committee Secretary 

NETTIE SABELHAUS, Consultant on Governor's Appointments 








20 California Court Reporters Association (CCRA) 


Court Reporters Board 


Sacramento Official Court Reporters Association 



Government Relations 

Deposition Reporters Association 



District 3 Representative 

Deposition Reporters Association 

Agricultural Labor Relations Board 






























Proceedings 1 

Governor ' s Appointees : 


Court Reporters Board 1 

Background and Experience 1 

Questions by CHAIRMAN BURTON re: 

Electronic Recording 4 

Witnesses in Support : 


California Court Reporters Association 5 

YVONNE FENNER, Vice President 

California Court Reporters Association 6 


Sacramento Official Court Reporters 6 


Government Relations 

Service Employees International Union 6 

Witnesses in Opposition: 


Deposition Reporters Association 6 

DEBRA CODEGA, District 3 Representative 

Deposition Reporters Association 11 

Response by MR. CRAMER 12 

Motion to Confirm 13 

Committee Action 13 




























Agricultural Labor Relations Board : 14 

Introduction and Support by 


Background and Experience 15 

Questions by CHAIRMAN BURTON re: 

Number of Backlog Cases 17 

Reason for Keeping Bankruptcy 

Cases Open for So Long 18 

Oldest Case Still Open 18 

Questions by SENATOR JOHNSON re: 

Involvement of Hernandad Mexicana Nacional in 
Controversy about Citizenship Classes and 
English Classes Funded through State 
Department of Education 19 

Questions by SENATOR KARNETTE re: 

Farmworkers' Understanding of Their 

Relationship to Management 19 

Ways Farmworkers Can Get Correct 

Information 19 

Union or Nonunion Supervisors 2 

Motion to Confirm 21 

Committee Action 21 

Closing Comments by SENATOR ROMERO re: 

Diversity on Boards 22 

Termination of Proceedings 22 

Certificate of Reporter 23 

--00O00 — 

CHAIRMAN BURTON: First thing, Gary Cramer, 
Member of the Court Reporters Board. 

MR. CRAMER: Thank you for giving me an 
opportunity to appear. 

My name is Gary Cramer. I've been a court 
reporter for about 35 years. I guess that makes me old. 

With regard to -- I work -- excuse me. I work 
for the Los Angeles Superior Court, and prior to that worked for 
Los Angeles Municipal Court before unification. 

With regard to Board actions that I've been 
engaged in since appointment by the Governor, I have worked with 
the Joint Legislative Sunset Review Committee to implement, 
enhance consumer protection of students enrolled in court 
reporting schools, which has been a serious problem; improve the 
pass rate of examination by pretesting of subject matter. 
Experts, we've developed a new occupational analysis of court 
reporting that's testing the — that's a testing plan of 
knowledge and skills and abilities; improve the dictation and 
pretesting of the design to increase the number of evaluators. 

We've got a Memorandum of Understanding with the 
Bureau of Private Postsecondary Vocational Education to 
cooperate in joint school oversight, revision and distribution 
of new consumer brochure. Modification and increase court 
reporter school teacher qualification, and that came through the 
sunset and review process and through legislation, or the 
mandates of legislation; development and standardization for 

school -- I'm sorry, for students, school qualifier tests. 

Development of a strategic plan, we've developed 
a mission statement, a vision statement, testing of applicants 
for the CSR licensure. 

I've attended professional association meetings 
and provided training to Court Reporter Board staff. We've -- 
that's been an area that I've had a particular interest in, 
given the fact that there has not been a reporter who works in 
court on the Board in about 15 years. We've had just free-lance 
court reporters on the Board during that 15-year period. 

I've also helped organize subject matter experts 
for test validation. 

And then in terms of the goals that I personally 
have as regards what I think I have some particular expertise in 
for the Board is in improving communication with consumers; 
identify rules, regulations, and statutes that need 
clarification for consumer protection; ensure the adequacy of 
information and availability to the students to make -- so that 
they can make informed judgments concerning educational -- their 
educational success of each of the schools that teaches court 

I think there's a real need for the development 
of a compendium of rules, regulations, and statutes applicable 
to official and free-lance court reporters. There is actually 
nobody in the entire State of California that is responsible for 
notifying court reporters of any changes in rules or statutes. 

CHAIRMAN BURTON: How about the Board? 

MR. CRAMER: They have not taken on that, and 

1 that's something, I think, that we need to do, and that's 

2 something that I have a particular interest in getting the Board 

3 to do. 

4 CHAIRMAN BURTON: Doesn't take a constitutional 

5 amendment. They just do it. 

6 MR. CRAMER: Right. That's something we're 

7 trying to move forward with at my suggestion. 

8 We should be monitoring comment, for instance, on 

9 proposed legislation. We rarely do that because we don't do a 

10 very good job of following legislation that's introduced, and I 

11 think there's information that you folks should get. 

12 We need -- 

13 CHAIRMAN BURTON: I actually get more information 

14 from Mr. Murphy than I really care to have, so I don't know 

15 about getting any more. 

16 [Laughter. ] 

17 MR. CRAMER: I'm not sure if that's a compliment 

18 or what that is. 

19 CHAIRMAN BURTON: It's a compliment to 

20 Mr. Murphy. 

21 MR. CRAMER: We ought to — we need to — but I 

22 think it is important that — what we have done is, the Board 

23 has expanded their committees. And by doing that, they are able 

24 to address in a better way, I think, because for instance, the 

25 Education Committee consists of student representatives, lawyer 

26 representatives, court reporter representatives, and they are 

27 very active in reviewing things and making proposals. But those 

28 proposals need to be pushed forward to the people that have the 

authority, such as yourselves. 

CHAIRMAN BURTON: We do have as part of the 
record your statement of goals. 

I've got just really one question. 

There are a lot of proposals put together by the 
Chief Justice in his capacity, I guess, as the Chair of the 
Judicial Council, to try to do something with the budget cuts 
they're going to have and still keep a court systems going. 

One is dealing with the subject matter of 
electronic recording, as opposed to manual recording. 

I mean, has the Board ever looked at that to see 
how that might work without adding to the unemployment roles 
necessarily, or unnecessarily or what? 

MR. CRAMER: No, I don't believe the Board has 
specifically looked into that. 

I think the attitude of the Board has been, to 
the extent that the Legislature has decided that shorthand 
reporting is the way that it should be done here in California, 
that the Board's job then sort of moves forward from there in 
terms of making sure that people are qualified and what have 

CHAIRMAN BURTON: I understand that, but I mean, 
the Board deals with, if we can call it an industry of court 
reporters, that there's an ongoing debate and, I think, yearly 
legislation put in to deal with electronic recording. 

It would seem to me in the interest of the 
profession that the Board oversees, regulates, or whatever, they 
may well try to get ahead of the sheriff and figure out, if such 

things are to come about as either cost savings, efficiency, or 
who knows what, what would be the best way to implement 
something like that, at the same time, I think, preserving the 
tremendous benefit of having live court reporters. 

That's just a thought that I have. 

Senator Johnson. 

SENATOR JOHNSON: Thank you, Mr. Chairman. 

Out of my high regard not only for the profession 
of court reporters in general, but Ms. Mizak in particular, I 
have no questions. 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: No questions. 

CHAIRMAN BURTON: Senator Knight. 

SENATOR KNIGHT: No questions. 

CHAIRMAN BURTON: Senator Karnette. 

SENATOR KARNETTE: No questions. 

CHAIRMAN BURTON: Witnesses in support, briefly. 

MS. BUNCH: Briefly, Chairman Burton, Members, 
I'm here on behalf of the California Court Reporters Association 
and its 1500 members. 

My name is Sandra Bunch. I'm a free-lance court 
reporter in Sacramento. 

Mr. Cramer is the right choice and the best 
choice for the CR Board. He has integrity, honesty, wisdom, and 
expertise in all areas affecting the stakeholders to the Board, 
which include licensees, students, official court reporters. 

CHAIRMAN BURTON: You're in support? 

MS. BUNCH: We're in support. Thank you. 

MS. FENNER: My name is Yvonne Fenner, and I'm a 
free-lance reporter in the Sacramento area. I'm also the Vice 
President of the California Court Reporters Association. 

I thank you for this opportunity to speak in 
support of Mr. Cramer. He has immense knowledge. He's able to 
approach a task from many different areas. He gets the job 
done . 

We are in support. 


Other witnesses in support. 

MS. REDLICH: My name is Cheryl Redlich, and I'm 
the President of the Sacramento Official Court Reporters. And 
our 70 members are in support of Gary Cramer. 

Thank you. 

MR. DAVENPORT: I'm Allen Davenport, Director of 
Government Relations for the Service Employees International 
Union. Mr. Cramer is one of our members, one of our re-elected 
members on many occasions as a leader in his local union. 

He's also helpful on the Court Employee Labor 
Management Task Force, in putting together the employment 
relations work in the restructuring of the courts that, I think, 
benefitted everybody in the state. 

CHAIRMAN BURTON: Witnesses in opposition. 

MS. BARDELLINI: Good afternoon, Senator and 
Chair people, Committee Members. My name is Mary Bardellini, 
and I'm President of the Deposition Reporters Association. 

And for the benefit of the audience, I'd like the 
record to reflect I was a Girl Scout for twelve years. Thank 

you very much. 

[Laughter. ] 

MS. BARDELLINI: I'm here today on behalf of the 
hundreds of court reporters throughout the State of California 
who oppose the nomination and confirmation of the Mr. Cramer. 

I think it needs to be brought to this 
Committee's attention that Mr. Cramer is very involved in court 
reporting throughout the state, for which I respect. Mr. Cramer 
is not only involved in the SEIU in Southern California, he is 
paid, to my understanding, in excess of $40,000 to represent the 
Union's interest as it involves court reporters. 

He is on the Board of Directors of the Los 
Angeles Court Reporters Association. He's intimately involved 
in the workings of the California Court Reporters Association, 
and as you well know, works very closely with Mr. Murphy on 
legislation. He is presently a member of the Reporters 
Reporting for the Record Task Force involving the office of the 
court and the Judicial Council. 

And I personally am working with Gary at the 
present time on a coalition, working with the Governor's 
budgetary proposals. 

With this background, I think it shows that there 
is an inherent conflict of Mr. Cramer being on a consumer 
board. His connections to court reporting runs so deep, Senator 
Burton, that if in fact the Court Reporters Board were to 
propose that ER, perhaps, is a better way, there is no way that 
Mr. Cramer, who gets paid by the Union to represent the Union 
positions of court reporters, can protect the consumers. 


I had personal experience with Mr. Cramer in the 
'80s for some seven or eight years. Worked on the California 
Court Reporters Association with Mr. Cramer. And as bold as 
this is, I have to share with you that this man takes no 
hostages. He has no problems insulting women, belittling 
people. He degrades people who do not agree with him. 

The people that have come here today to express 
their opinion in favor of Mr. Cramer are advocates of Mr. Cramer 
because they agree with Mr. Cramer. 

CHAIRMAN BURTON: That's usually how it works. 

MS. BARDELLINI: Absolutely, and I'm here to let 
you know that there are plenty of people in the State of 
California that don't. 

As a result of Mr. Cramer's untenuous position 
over the years in the Association, there was a schism that 
arose, and as a result of the inability to compromise, there are 
now two other state associations that separated from the 
California Court Reporters Association. This is a direct result 
of the inability to compromise. 

And I would suggest to you that anybody who is 
going to serve on a state consumer board should have the 
capacity to listen, and respect, and allow for there to be the 
open exchange of ideas. 

The two or three hundred people that wrote 
letters and signed the petition were very passionate about the 
fact that this man does not respect other people's time, and 
ideas, and energies. 

And I would suggest that with 2500 people being 

involved in state associations in California, that approximately 
half of them have sought other associations so that they can 
perform and be court reporters. They do not want to be involved 
where this man is involved. 

In terms of going forward and working with the 
California Court Reporters Board, it means interacting with 
other associations. If Mr. Cramer is allowed to continue to 
serve on this Board, it will curtail a lot of dialogue with a 
lot of people and a lot of associations who feel that their 
efforts would be wasted. 

I would just like to say that in a state where 
there's approximately 8,000 licensees, we believe that the 
Governor could certainly appoint some other court reporter where 
there would not be the conflict of interest, where there would 
be the openness and the opportunity for people to share and 
exchange ideas, that somebody else could be appointed who is not 
a lighting rod for dissension. 

Thank you for this opportunity. I appreciate it. 

CHAIRMAN BURTON: Thank you very much, ma'am. 

The Board is set up with two court reporters. 
One is from the court, one is a free-lance. That's how that 
works, with three public members. 


CHAIRMAN BURTON: So, do they have some bylaws 
that the other four votes don't count, and only Mr. Cramer's? 

MS. BARDELLINI: The history that I have had with 
Mr. Cramer in terms of his ability to accept and allow for 
interchange of ideas makes it very intolerable to go and present 


and work with him on these boards, so much so that after working 
on a board with him for seven or eight years, there was a schism 
that was created. 

This is not a person who wants to entertain, in 
our opinion, does not play well with others. 

While I agree that it would be nice to have 
somebody on the state licensing board who represents official 
court reporters, and somebody in the court reporting community 
who actually spends his time working as a court reporter, it's 
my understanding that Mr. Cramer doesn't even report any more. 
But the fact is, I do agree with the idea that there be a member 
of the Court Reporters Board -- 

CHAIRMAN BURTON: Just not that one. 

MS. BARDELLINI: Just not somebody, as I said, 
who's a lightning rod for dissension. 

And you folks work on committees, obviously, and 
know what it's like to have somebody who shuts down discussions, 
who's rude to people, who intimidates. 

[Laughter. ] 

MS. BARDELLINI: I know you find that hard -- 

SENATOR JOHNSON: I can only imagine. 
[Laughter. ] 

[Laughter. ] 

CHAIRMAN BURTON: I mean, if you're after my job, 

too, say so 

MS. BARDELLINI: Chairman Burton, I was going to 


say, do not take this personal. 

I think actually there's some similarities in 
style, and thank God I'm not pursuing public service. 

And as a court reporter, I'm expecting that my 
license may be in jeopardy just by being here today. It's kind 
of a bold move. 

CHAIRMAN BURTON: I would doubt that. I didn't 
take the insults of me personal. I thought it was just generic 
to people who don't suffer fools gladly, and are rude, and 
abusive, and single-minded. 


CHAIRMAN BURTON: With that, thank you. 

Ma ' am . 

MS. CODEGA: After all that, this is going to be 

My name is Debra Codega. I am a Deposition 
Reporters Association, District 3 Representative. 

I am opposed to Mr. Cramer's appointment. 
Because of the controversy that surrounds him in the reporting 
profession as it exists in California today, I feel that he 
would not be an effective representative of our profession on 
the Board. I am concerned that he will not be able to put aside 
personal agendas to accomplish what's best for consumers and 
reporters alike. 

And there are many qualified, politically savvy, 
outstanding and dedicated members of the reporting profession 
who could sit on the Board and do an excellent job of 
representing our profession, who would have the support of all 


1 of the reporters in California. 

2 Thank you very much. 

3 CHAIRMAN BURTON: Thank you. 

4 Would you like to respond? 

5 MR. CRAMER: If you want me to. 

6 CHAIRMAN BURTON: Yes, I think it would be nice. 

7 MR. CRAMER: I get the -- it sounds very personal 

8 to me. I hope it does to you, too. 

9 CHAIRMAN BURTON: Well, it probably sounds 

10 personal because they're up here opposing you for an 

11 appointment, and they couldn't make it impersonal. 

12 MR. CRAMER: Well, I guess what I'm saying is, I 

13 think I am qualified. 

14 And I would only suggest in terms of, I guess, my 

15 personality is what's at issue. 

16 In 2001, I was awarded the highest award the 

17 National Court Reporters Association awards to anybody in the 

18 United States, and they award it to one person a year. And 

19 that's their Distinguished Service Award. 

20 CHAIRMAN BURTON: Is that for genealogy? 

21 MR. CRAMER: Well, my point is, they vet very 

22 closely the people they give this award to, because they don't 

23 want people who would conduct themselves in the way that was 

24 just described. 

25 CHAIRMAN BURTON: I guess the best thing to do, 

26 without getting into who said, she said, I said, they said, is 

27 that for better or for worse, you may want to fake some of the 

28 criticism under consideration and just try to be, you know, a 


little more pleasant when you're telling people you think their 
ideas are stupid. 

Be a Lungren: You're wrong, and let me tell you 

MR. CRAMER: Well, and I appreciate that. I 
have — you know, I took that -- 

CHAIRMAN BURTON: You probably have enough years 
not to change much, but I think that, you know, most of the 
stuff seemed to go to your personality. 

Any questions as a result of the -- 

SENATOR JOHNSON: Would you like to assure us 
that you're going to do a better job? 

MR. CRAMER: I would. Actually, I had the same 
conversation with Mr. Yamaki from the Governor's office. And I 
think if you check with my fellow Board members, you will find 
that my behavior has been exemplary since my appointment. 


Call the roll 

SECRETARY WEBB: Senator Karnette. Senator 




Knight Aye. Senator Romero. 


Romero Aye. Senator Johnson 

SECRETARY WEBB: Johnson Aye. Senator Burton 

Burton Aye. Four to zero. 
Congratulations . 



MR. CRAMER: Thank you all. 

CHAIRMAN BURTON: Cathryn Rivera-Hernandez. 

SENATOR ROMERO: Mr. President and Members, it's 
my honor to introduce Cathryn Rivera. She's a remarkable woman 
who I've known for several years. She is, of course, up for 
confirmation today to the ALRB. 

You probably know that she served as the 
Governor's Chief Deputy Cabinet Secretary, particularly was 
responsible for having liaisons with state agencies, departments 
and boards, and especially the ALRB. 

I've known her for sometime beforehand, though, 
when she worked with Hernandad Mexicana Nacional in Los Angeles. 
She was the Policy Director. I remember when I was first 
elected to the State Assembly, the former founder-director, Burt 
Corona, called me, said, "You've got a great person who's coming 
up if you need chief of staff." I had already made a decision 
at that time, but having had the ability to work with her over 
the years, I can certainly see the vision that he had, and how 
it's been translated to a new generation. 

She's a really unique person. She comes from a 
family of farmworkers. Her mother worked the fields, and all of 
her aunts. She's dedicated. She's hard working. She's 
passionate. But I think above all, she's fair. And I think 
she's type of person that we want to have on this most important 
board for California's farm industry and farmworkers. 

So, I proudly present Cathryn Rivera-Hernandez. 


Thank you, Chairman Burton and Members of the 


1 Rules Committee. I appreciate the opportunity to appear before 

2 you today. 

3 When I was appointed to the Agricultural Labor 

4 Relations Board in November of last year, I felt I was being 

5 given the opportunity of a life time. For a person who had 

6 taken every opportunity to engage in agricultural labor issues 

7 while serving in the Governor's office, and as an attorney who 

8 is committed to the fair enforcement of the law, there was no 

9 better opportunity than to be entrusted with enforcing not only 

10 one of the most unique labor laws in the nation, but within one 

11 of the largest industries in the state. 

12 California's agricultural industry leads the 

13 nation in agricultural production, contributes over 27 billion 

14 to our economy, and is powered by over 600,000 of California's 

15 hardest working people. And it is the Agricultural Labor 

16 Relations Act that protects these individuals. 

17 The men and women that work in our fields deserve 

18 to be treated fairly. They are entitled to adequate working 

19 conditions, and they must have the right to choose whether they 

20 want representation without interference. 

21 I would also be fortunate to join a board that 

22 has made extraordinary progress over the last four years. I 

23 hope to make a meaningful contribution to these efforts, and to 

24 help prepare the Board for the challenges ahead. 

25 The most immediate effort was engaging in the 

26 ! implementation of the mandatory mediation and conciliation 

27 legislation passed last year. Being charged with implementing 

28 what is the most significant change to agricultural labor 


relations since the Act itself was passed, the Board and staff 
worked diligently to draft and adopt regulations that were 
within the law's intended purpose to provide a more effective 
collective bargaining process. The Board sought and received 
extensive input from numerous stakeholders, including the 
Board's Ad Hoc Advisory Committee, which includes 
representatives from both labor and management, and a 
representative group of arbitrators. 

I believe the regulations provide a fair 
procedure that meets the statutory requirements and are within 
the spirit with which the law was passed. 

In addition to seeing through the implementation 
of this bill and handling our caseload, it will be critical in 
the near future for the Board to continue to identify 
opportunities for improvement without additional resources. The 
inclusion of the ALRB within the Labor and Workforce Development 
Agency will be instrumental in this goal. I am currently 
serving on its subcommittee with other Labor Department staff to 
find ways to maximize resources and more effectively enforce our 
respective labor laws. The Board is also using existing agency 
resources and expertise to improve our outreach efforts. 

In the long term, I want to work with the Board 
to achieve quick and full compliance with the Board's decisions, 
since the most fair and equitable decisions are meaningless 
without it. And also to increasingly inform individuals about 
their rights and responsibilities under the Act, since as one 
worker stated, "Not knowing my rights is the same as not having 
them. " 


In conclusion, if I am confirmed, I will work to 
achieve the goals of the Legislature when it passed the 
Agricultural Labor Relations Act. That is, that farm laborers, 
farmers, and all the people of California will be served by the 
Act. I will accomplish this by interpreting the law fairly, 
issuing timely decisions, and working to ensure those decisions 
are enforced. 

I would be honored to carry out this charge, and 
respectfully request your confirmation of my appointment. 

Thank you. 


Do you have any idea of the number of backlog 



MS. RIVERA-HERNANDEZ: There are currently 23 
cases pending in the General Counsel's office for compliance. 
Nine of those are going on track within the normal process. 

There are fourteen that are older cases. 
Largely, they are either out of business, or have gone bankrupt, 
but they're kept open until all efforts to collect have been 

There are two cases that are not back pay, that 
are actually make whole-cases, where attempts to find a 
comparable contract have taken way longer than it should. And 
those cases should have been out long ago. 

CHAIRMAN BURTON: You keep open cases if, for 
whatever reason, the business went out of business. Why is 


that? Just something you have to do until it's determined? 

MS. RIVERA-HERNANDEZ: There's a pretty high 
standard that the Board has historically set for closing cases, 
and that is that the region has to prove that there are 
absolutely no assets available, and that there is no one that 
can be held liable. So, they go through the process of debtor's 
exams and have actually hired people — 

CHAIRMAN BURTON: What's oldest case in years? 


CHAIRMAN BURTON: I mean, after ten years — 

MS. RIVERA-HERNANDEZ: In that case, it was — 
it's a make-whole case, and so the problem is finding -- is not 
necessarily finding the person. 

CHAIRMAN BURTON: Let's assume they're kind of 
dead cases, or somebody going out of business case, does it cost 
a lot of money to keep them open or what? 

MS. RIVERA-HERNANDEZ: I don't think it ' s a 
matter of the amount of resources so much as the matter of time 
that it takes. So, we try — again, once that standard is met, 
they do send cases to the Board for closure, or to the General 
Counsel, I should say. 

CHAIRMAN BURTON: Senator Johnson. 

SENATOR JOHNSON: Thank you, Mr. Chairman. 

I had a question about Hernandad Mexicana 
Nacional and your work there. 

Is this the organization that was involved in a 
good deal of controversy about citizenship classes and English 
classes that were funded through the State Department of 


Education, and the classes apparently weren't held? Is this the 
same organization? 


SENATOR JOHNSON: What can you tell us about 
that? Did that occur during the timeframe that you were with 

MS. RIVERA-HERNANDEZ: Those issues arose as I 
was leaving. They were going through financial difficulties, 
and so that was when I left the organization. 

I don't know a lot about the claims they had. 
Although I am an attorney, I didn't serve as their counsel. 
They had other attorneys handling those, so I'm not familiar 
with them. 

SENATOR JOHNSON: So you weren't involved in 



Senator Romero. 

SENATOR ROMERO: No questions. 

SENATOR JOHNSON: Senator Karnette. 

SENATOR KARNETTE: I'm concerned, there's no 
question here about it, but I want to be sure that the 
farmworkers understand their relationship to management. 

But who actually gives them that information? Is 
it the supervisor or the person who's managing the -- oftentimes 
they don't speak English. 

How do you know they get the right information? 

MS. RIVERA-HERNANDEZ: Well, I think we, the 


Board, tries to do that in a number of ways, and that is, one, 
the distribution of brochures and actually going out and 
providing them to the farmworkers, as well as the participation 
on radios. They often carry the radios with them, and so we 
know that is an effective way to get information out there about 
their rights. And if they have any questions, giving them the 
information about the Board and who they can contact. 

SENATOR KARNETTE: I'm always concerned about 
that middle person, that they're not taking advantage, no matter 
who that might be. 

You have people that come in, that check on that, 
or do you confer with others, like other people that would be 
around? More than one person, in other words. 

MS. RIVERA-HERNANDEZ: We don't go — because 
we're -- we don't go out and do reviews, or raids, like similar 
to some other labor departments. 

So, they are -- they mainly learn their rights 
from discussions among the workers. And then you also have the 
unions out there also, talking to them. 

But it's a matter of -- and there's always room 
for improvement, and that is making sure that the information is 
available, and that we are out there in their region. 

SENATOR KARNETTE: Is the supervisor an union 
member or not? 

MS. RIVERA-HERNANDEZ: You know, I don't --I'm 
not positive. I'm not sure. 

SENATOR KARNETTE: Because that would create a 
little conflict I would think. 


MS. RIVERA-HERNANDEZ: Right, right. Yeah, I 
don't know for sure. It's probably on a case-by-case 
basis . 


SENATOR JOHNSON: Senator Knight. 

SENATOR KNIGHT: No questions. 

SENATOR JOHNSON: Witnesses in support? 
Witnesses in opposition? 

Did you have any family members you wanted to 

MS. RIVERA-HERNANDEZ: I have my husband, Ignacio 
Hernandez, and my two fellow Board members here. 

SENATOR JOHNSON: What's the pleasure of the 

SENATOR KARNETTE: Move the nomination. 

SENATOR JOHNSON: Call the roll. 

SECRETARY WEBB: Senator Karnette. 



Karnette Aye. Senator Knight 


Knight Aye. Senator Romero. 


Romero Aye. Senator Johnson. 

SECRETARY WEBB: Johnson Aye. Senator Burton. 

SECRETARY WEBB: Burton Aye. Five to zero. 
CHAIRMAN BURTON: Burt Corona, is he alive or 































MS. RIVERA-HERNANDEZ: He passed away. 

CHAIRMAN BURTON: He was what, 8 9? 

MS. RIVERA-HERNANDEZ: He was old. He was 
working up until his last days. 

SENATOR ROMERO: I'm always raising questions of 
diversity here in Rules. 

I've got to say that in looking at the 
composition of the ALRB, this is actually a majority female 
board. A lot more boards could look like that. 

[Thereupon this portion of the 

Senate Rules Committee hearing 

was terminated at approximately. 

2:07 P.M.] 

— 00O00-- 


I, EVELYN J. MIZAK, a Shorthand Reporter of the State 
of California, do hereby certify: 

That I am a disinterested person herein; that the 
foregoing transcript of the Senate Rules Committee hearing was 
reported verbatim in shorthand by me, Evelyn J. Mizak, and 
thereafter transcribed into typewriting. 

I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

j* IN WITNESS WHEREOF, I have hereunto set my hand this 

/ <~> day of /?7<£^MS 2003. 


Shorthand Reporter 


471 -R 

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APR - 1 2003 



ROOM 112 


1:37 P.M. 





ROOM 112 


1:37 P.M. 

Reported by: 

Evelyn J. Mizak 
Shorthand Reporter 











GREG SCHMIDT, Executive Officer 

PAT WEBB, Committee Secretary 

NETTIE SABELHAUS, Consultant on Governor's Appointments 






Veterans Affairs 


EZELL WARE, JR., Brigadier General 
Assistant Adjutant General 
California National Guard 


Allied Council, Yountville Home 

Member, California Veterans Board 

JOHN CLECKNER, Major (Ret.) 
Shasta County Veterans Council 

CHARLES PARNELL, State Commander 
American Legion 


JOHN LOWE, State Adjutant 
Veterans of Foreign Wars 

MIKE GREENE, Secretary- 
Board of Directors 
Disabled Veterans Business Enterprise 

JOHN CANFIELD, Past Legislative Director 
Veterans of Foreign Wars, Dept . of California 


Blinded and Gay/Lesbian Veterans 

DON HARPER, President 
o California Association of Veteran Service Agencies 


California Association of County Veterans Service Officers 










DVBE Network 

Sacramento County and Vicinity 

14 DON MATTSON, Brigadier General 

Director, California Military Museum 

BENTON HOM, Colonel (Ret.) 

U.S. Army 

VFW, American Legion, State Military Museum, and 

Asian American Groups 

EDWARD E. GORRE, Lt . Colonel 

Past President 


IVANN E. GREENE, Lt . Colonel (Ret.) 
California Department of Veterans Affairs 

DELPHINE METCALF- FOSTER, Junior Vice Commander 
23 Disabled American Veterans 


California State Commanders Veterans Council 

26 RON MARKARIAN, President 

Central California Chapter 
Association of the U.S. Army 



Unaffiliated Veterans Advocate Coalition 




Proceedings 1 

Governor ' s Appointees : 

Veterans Affairs 1 

Opening Statement 1 

Current Budgets 2 

Problems, Veterans Homes 4 

Barstow 5 

Yountville 6 

Chula Vista 6 

Finances Needed 7 

Recent Changes 8 

Statements by SENATOR ROMERO re: 

Support of Latino Caucus 10 

Questions by SENATOR KNIGHT re: 

Justification of Size of New 

Veterans Homes 10 

Progress of Construction of New 

Veterans Homes 12 

Billing and Collections 15 

Contract with HMS 16 

Governor's Proposal to Raise 

Fees of Members 17 

DBVE Requirement and Possible Fraud 18 


Number of Veterans Homes Complaints 

Per Month 2 

Problems with Veterans Talking to 

Legislators 20 

Reduction in Medical Staff at 

Yountville Home 21 

Statement of Opposition by SENATOR KNIGHT 23 

Statement of Support by SENATOR KARNETTE 2 3 

Questions by SENATOR KARNETTE re: 

Veterans Hospital in District 24 

Billing 25 

Statements by CHAIRMAN BURTON re: 

Homeless Veterans 27 

14 Witnesses in Support: 










Chief Assistant Adjutant General 

California National Guard 2 8 

19 Allied Council, Yountville Home 

Member, California Veterans Board 2 8 


U.S. Army Special Forces 

Former Chair, Board of Northern 

California VA Systems of Clinics 

Advisory Council 31 

CHARLES PARNELL, State Commander 

American Legion 34 

26 JOHN LOWE, State Adjutant 

Veterans of Foreign Wars . . . 3 5 



VI 1 


DVBE Alliance 3 7 

JOHN CANFIELD, Vice Commander 

Veterans Affiliated Council of 

Sacramento and Vicinity 3 8 


Blinded Veterans of America and Gay and 

Lesbian Veterans 4 

DON HARPER, President 

California Association of Veterans 

Service Agencies 42 

10 California Association of County 

Veteran Service Officers 44 





14 California State Military Museum 46 

Past Post Commander, American Legion and VFW 46 






ALLEN AMARO, Past Legislative Chairman 

Department of California for American Legion 45 


Past President, TROA/MOAA 47 


Staff, California Department of Veterans Affairs 4 8 

DELPHINE METCALF- FOSTER, Junior Vice Commander 

Disabled American Veterans 49 


California State Commanders Veterans Council 49 


Central California Chapter Association of the 

U.S. Army 50 


Unaffiliated Veterans Advocate Coalition 51 














VI 11 


Representing State Commander 

American Veterans 52 

Statements in Opposition by SENATOR JOHNSON 52 

Motion to Confirm 54 

Committee Action 55 

Termination of Proceedings 55 

Certificate of Reporter 56 

Submitted Testimony of MAJOR JOHN CLECKNER, Retired 

Shasta County Veterans Council 57 

Submitted Testimony of JOHN LOWE, State Adjutant 

Veterans of Foreign Wars 61 

Submitted Testimony of TOM SWANN 

Blinded and Gay/Lesbian Veterans 64 





1 P-R-O-C-E-E-D-I-N-G-S 

2 --00O00-- 

3 CHAIRMAN BURTON: File item number two, 

4 Governor's appointees, Maurice Johannessen, Secretary, Veterans 

5 Affairs. 

6 I would like to ask the witnesses today that have 

7 prepared statements to submit them. We will make them part of 

8 the record, and briefly state your support or opposition. But 

9 those with prepared statements, submit them for the record. 

10 Then the way it works, for those that don't know, 

11 we call for support first, then we call for opposition. So 

12 briefly, like, "We are in support of," and give a few brief 

13 statements; if you're in opposition, "Opposition of," and a 

14 brief statement. 

15 Senator Johannessen. 

16 SENATOR JOHANNESSEN: Thank you, Mr. Chairman and 

17 Members. 

18 The process in which I will use to go through 

19 this may be a little bit verbose, but I'm hoping that you'll 

20 bear with me. 

21 First, I'd like to point out that we're only 

22 about a little over three hours now there's a deadline for the 

23 war in Iraq. And I think it's a good idea to reflect on what we 

24 owe the veterans and what they have done for us in the past. 

25 And also I would like to point out that only 

26 having been the Secretary of the V.A. for less than 90 days, I'm 

27 hoping that we can deal with those things that are present and 

28 perhaps looking a little bit into the future. I will try to 

take you to not only where we are, but also the potential of 
where we are going. 

I think it is important that we -- by the way, 
the Members of this Committee, I'm pretty sure, are aware of all 
of this, but it maybe informative for those people who are here. 
There has been a tremendous outpouring of support for this 
nomination, as well as the letters and information that have 
been received. 

I'm very, very grateful to those comrades behind 
me here who have taken the time to show up. I hope they 
understand that the time is short, and they use as short a 
presentation as they possibly can. 

So with that, as you also know, I chaired the 
Veterans Committee for the last six years, and Colonel Knight, 
of course, was a member of that committee as well, so I know all 
of you are pretty well familiar with it. 

With that, Mr. Chairman and Members, I'd like to 
go over just a little bit of sort of a snapshot of what we're 
doing today. 

The California Department of Veterans Affairs is 
actually a big operation, probably bigger -- in fact, it's 
really bigger than I realized before I took the job. We have a 
lot of people there. 

We have budget of $380 million; Farm and Homes is 
about 220; and the Veterans Homes, of which we have three of 
them, basically breaks down to 68.3 million for Yountville; and 
Barstow, 21.4; and Chula Vista, which is our latest one, 20.1. 

We're doing construction at the rate of about $44 

1 million, and the Veterans Homes we're doing 37.2 million, and we 

2 also have a cemetery of 6.6 million which is on its way of being 

3 built right now as we speak. The Veterans Services is about $5 

4 million. 

5 The Farm and Home funding program is, the bond 

6 itself is about 220; the Veterans Home bond itself is 3 million; 

7 General Fund, 68 million; the federal funds that we get back is 

8 | 32; and reimbursement and other is 59 million. 

9 I don't think I want to go through all of this 

10 because it may be too much information here that you probably 

11 won't need. 

12 But in the Veteran Home operations, which is, of 

13 course, one of the most serious ones that we're dealing with, we 

14 have the Barstow Skilled Nursing Facility Licensing, Yountville 

15 Hospital Operations and Collections, Chula Vista Skilled Nursing 

16 Facility Occupancy; Veterans Homes construction; cemetery 

17 construction; Farm and Home loan eligibility; and Veterans 

18 Services. 

19 In the staffing and organization, we have common 

20 administrative policies, statutory and regulatory compliances, 

21 organize by business lines, written regulations of policies and 

22 procedures. These are some of the things being worked on that 

23 we're doing right now. 

24 And I want to break a little bit back of this 

25 one, because I think it's important that we get into some of 

26 the, perhaps, the most things which you probably would be 

27 interested in, which is how the homes are currently being 

28 operated; the number of staff that we have; and what has been 

happening in the past; and what we're trying to change. 

The problems that we have had with the veterans 
homes, and you hear a lot about problems in the veterans homes, 
which isn't actually true. We have two veterans homes that 
don't seem to have any problem, but we have one that is Barstow, 
which causes us more than a little headache. 

In order to solve that problem, the Governor has 
approved appointments of Deborah Kania, she's an RN and a Deputy 
Secretary of the Home Division; George Andries is the current 
Deputy Secretary, Home Division, will become Deputy Secretary, 
Planning and Construction to oversee the development of five new 
veterans homes. 

And by the way, we are in the process right now 
of having or building five new veterans homes on a scale which 
even the federal government has never done before for the 
veterans. So, it is a big, big project going on. 

We also have approved a new Nursing Home 
Administrator in Chula Vista, named Ann Murray. And we have a 
new Licensed Nursing Home Administrator in Barstow named Bruce 
Janssen; and a Licensed Nurse Administrator, which is the first 
time we've had that, by the way, Louise Koff which will be in 
the Yountville area. 

These are key components in order to be able to 
professionalize and go in the direction which we feel we have to 
go, which is more in the long-term care than in the model which, 
up to now, we have used. The reasons for that is, we think that 
would be much more appropriate for what we're trying to do and 
the help we're trying to give the veterans. 

Barstow capacity, we have 400 capacity in 
Barstow: Domiciliary, we have about 220; Residential Care, 
none; Intermediate Care, 60; and Skilled Nursing, 120. The 
census we have as of 3/18, which would be yesterday, we had in 
the Domiciliary 111. We have in Intermediate Care 46, and 
Skilled Nursing Facility, 94. 

Let's deal with Barstow first. As you well know, 
and it has been widely publicized, that we've got trouble, yes. 
We have had a lot of trouble in Barstow. Many reasons for it. 
One of the major reasons is that it is so far out of the main 
track that we cannot keep employees, and it was just built in 
the wrong place at the wrong time. But we are trying to correct 
that . 

You've heard, because I know a lot of news people 
have been trying to second guess what's going to happen in 
Barstow, and I will tell you we are still in a little bit of 
flux, but it seems to me that the direction that we probably 
will go is that skilled nursing facilities will be discontinued 
in Barstow. Those people will be transferred to either Chula 
Vista or to Yountville. We are laying plans for all the 
alternatives so that the trauma will be as negligible as 
possible . 

But the decision as to how many we're going to 
transfer is still to be talked about. We are waiting for the 
permission from the Health Department, basically, the Department 
of Health, because they have to approve the plan that we have 
laid out for them. But that is one opportunity. 

The other thing we do know for the safety and for 

the benefit of our veterans, we no longer can operate that 
facility the way that it has been operated in the past, and 
something needed to be done. 

Yountville has a capacity of 1264. There are 
currently as of now 1,074 residents there. We have Domiciliary, 
635 right now; Residential Care for Elderly, we have 88; 
Intermediate Care, 131; and Skilled Nursing Facilities has 213. 
And we also have in Yountville an Acute Care Facility which 
right now is 7; we have a capacity of 26. Right now we have 7. 

In talking about Yountville, it's a beautiful 
facility. We will never build any facilities like that again. 
It contains a hospital, which, obviously, we cannot afford to 
build any place else, so there's a lot of things we're going to 
have deal with in Yountville. 

However, Yountville is on a fast track for 
upgrading. There is about $50-60 million coming out that are 
going to be used in Yountville to upgrade that, mainly because 
we need upgrade in various areas, but probably the most 
important one is to make proper arrangement for- dementia, 
Alzheimers, and this type of thing. 

Chula Vista, we have a capacity of 400. At the 
moment we have a Domiciliary, we have 150; Residential Care for 
the Elderly, 51; Intermediate Care, we have not licensed that 
yet so we can't do that. In the Skilled Nursing we have 61. 

I also want to perhaps inform you that we have 
just received the certification for opening the next pod, which 
is a 60-bed, which hinges, quite frankly, to make it staffed, to 
have it staffed. Once we get it staffed, it will be in 

operation. Then after that, we have another pod of 60 that can 
go in, but here again, there are some things we have to do that 
is doable, but we have some rework that has to be done, such as 
eating facilities and this kind of a thing. 

Now, the thing which you're probably going to ask 
is, what about the finances? How much money are you going to 
come and beg for this year? 

Well, sitting on this side of the table, I'll beg 
for it. We have, Yountville, we have probably, as you recall, 
probably 1999, I think you'll recall, and 2000 we had an unpaid 
balance of about $2 million we had borrowed; 2000-2001, we paid 
in full; 2001-2004, there was an unpaid balance of about 4 
million, and that's going to go with us. We're going to have to 
ask for some money on this for sure. 

Chula Vista had no requirement for a loan. 

In Barstow, we require about one-and-a-half 
million for cash flow purposes. 

Bear in mind that some of these homes, that 
reason that we have this cash flow problem is that they're not 
full. These homes are not full. 

And in Barstow, we have 1.5 million for cash flow 
purposes, and cash flow deficiency about 742,000. We will go, 
obviously come ask for that. 

Yountville requires a loan of 8.7 million for 
cash flow purposes, and a cash deficiency of 4.4 million. This 
is mainly due to reimbursement shortfalls. 

And also, I'd like to point out that in the 
budget itself there was sort of an overstatement. There was 


something mentioned there about $12 million. I think the 
reality is that on an ongoing basis, we're probably looking at 
somewhere around 6.6 million, which basically mirrors the amount 
of money for reimbursement. 

But I just want you to know, we're trying very 
hard every place we can to do things and find things that we can 
get reimbursements from the Federal VA, and we have been very 
neglectful in doing that, quite frankly, for sometime, but we 
will try to correct that. 

So with that, let me go back to what has been 
happening right now as we speak, what has been done in the last 
let's say 90 days. 

We have made changes within the structure of the 
department more in line with what you would find in the private 
industry. And in order to do that, we have to change some 
people around based on the qualification they have, but also on 
the interest that they have, and we have a tremendous amount of 
expertise. So, we are in the process of changing some of those 

We have basically separated in three different 
areas in order to add to the accountability and 
responsibilities. We have the one division which basically 
deals with the homes, the maintenance these homes, the medical 
part of the homes, and so forth. So that that particular 
individual, which happens to be Tom Kraus, is going to be 
concentrating on this because this is where our problems have 
been. Not to belittle the fact we've got problems in Farm and 
Home, but that is secondary right now to getting the homes 

straightened away, because there we have serious problems 
because now we're talking about lives, veterans' lives. 

The second portion of this is an administrative 
portion, which basically deals with the day-to-day operations in 

Then we have the third operation, which deals 
with the construction, renovations, and so forth. And we are 
gearing up on that one. We are gear up very, very fast right 
now. In fact, we are to the point now where we -- I believe we 
just about have all the lands and everything settled down on. We 
have architects being inquired at the moment, and so forth. So, 
that one's going to move very quickly. And we are asking the 
administration for additional manpower to do just that, because 
this is one big project to get going. 

But it is all in the amounts that is allowed in 
the two bonds issues. One, which was the original one, I think, 
that Colonel Knight, I think it was SB 16, I think, yeah. And 
that one, basically it was a $50 million bond. There was 
another bond which I carried which was the $62 million bond. 

The first bond issue was basically directed 
towards the building of West L.A., Saticoy and Lancaster. The 
second bond will be used for Redding and Fresno, and anything 
else that the other units will have to need or want. So, we 
have that funding in place. 

And at this particular point, the federal 
government has basically said, "Go for it," and we are currently 
working with the state staff in order to get the clearance of 
funding. So, we are rolling on that. 


Any questions? 

CHAIRMAN BURTON: Senator Romero. 

SENATOR ROMERO: Senator, as you know, I'm from 
Barstow, and of course I have visited the home, toured the 
home. It's very important to me. 

I appreciate the thought that you have given, the 
work that you've given to this issue of addressing it, and I 
look forward to seeing what recommendations you have as you go 

I would like to report to the Committee that I 
did meet -- in fact, Senator Johannessen did appear — before 
Latino Caucus yesterday, and the Latino Caucus members have 
asked me to convey to the Committee our very strong support for 
the confirmation of Senator Johannessen. 

I have no questions. 

CHAIRMAN BURTON: Senator Knight. 

SENATOR KNIGHT: Thank you, Mr. Chairman. 

There's a number of questions I have, Senator 
Johannessen. You know, as a result of recent legislation and 
work, we have established three new veterans homes as priorities 
for the construction, which will be the first ones to go: West 
L.A., Lancaster, and Saticoy. 

The Lancaster and Saticoy homes have been reduced 
from 400 down to 60. If you look at the representative veterans 
supporting those homes, you have, say, 300,000 representing 
Lancaster; 246 Fresno; and 76 representing Redding. 

The original home in Lancaster were 400 beds. 
How do we justify the size based on the appropriate veterans 


supporting those homes? 

SENATOR JOHANNESSEN: Colonel, it's a combination 
of several factors. Perhaps the most important one is the 
federal input. 

As you know, I hope you know, that the -- our 
federal counterpart, which is 65 percent of the funding, 
basically told us, "Never ever again will we approve of a home 
that far away from people that we need, " not only the people 
that you serve, but also where you can get proper care, which 
means you've got to be able to hire people and have a certain 
amount of people available. 

The plan, which I understand is the working plan 
at this point, as you recall as part of the bill that I put 
through for the purposes of these homes, I wanted to ensure that 
we had proper facilities for dementia and Alzheimers. The 
decision was made that the West L.A. Home would be the main home 
for these purposes. Not that each home shouldn't have, perhaps, 
some facilities for that, but that would be the main home, 
mainly because it's next to the Veterans Hospital, but also 
because they have the potential, and in fact they will be 
working on it as a research facility for dementia and 
Alzheimers . 

And so then, the question then was, where do you 
place these homes, and to what extent, numbers, do you have beds 
in these homes, and how do you deal with the main institution? 
That, of course, would be West L.A. 

The decision then was made that these homes would 
be feeder homes into L.A. because they are close enough to L.A. 


that we can do the necessary transfers if we have to. So, that 
was basically some of the decision we got into. 

Also, I think it's a good time to point out that 
we have lacked in the past the skills necessary to deal not only 
with dementia and Alzheimers, but also geriatric and long-term 
care. The people who are my age and younger and older, they 
need a lot of support, and they need a lot of long-term care. 
They are not necessarily -- 

SENATOR KNIGHT: I understand all that, Senator. 

Let me ask then, how do you propose building 400 
beds in Fresno and 200 beds in Redding? What's the criteria, or 
do you have a criteria, for establishing the size of a veterans 

SENATOR JOHANNESSEN: Yes, there is a specific 
criteria that was used by the federal government on how they 
allot these, yes, it's true. I don't have the exact criteria, 
but it is a pretty good sized book, Colonel. I will certainly 
be able get that to you. 


As I remember, and I've been working these issues 
for a number of years, but there was never any mention from the 
federal government to the effect that Lancaster did not satisfy 
the requirements for the federal government. That was never a 
problem, never an issue, and the project was approved. 

So anyway, how is the construction of the new 
veterans homes proceeding? 

SENATOR JOHANNESSEN: How are they proceeding? 
Well, having some experience in construction and development, 


the first step that we have to do now, and which is just about 
tied down, especially I think Lancaster. In fact, I think, 
Lancaster in fact was the first one, I think, to get all the 
paperwork together, is that you have to tie down the land. The 
land has to be donated. The old infrastructure has to be 
replaced through the property. 

SENATOR KNIGHT: Do all three homes have to have 
that completed before we can start construction on one home? 

SENATOR JOHANNESSEN: No. What we are doing 
right now, okay. The easiest way to explain this is that we 
have one home, which is a multi-story, somewhat unusual home. ; 
mean, it's a big facility. It may be 500-600 beds, we're not 
sure. It depends on how the finances work out. 

That has to have engineering and architects that 
are specifically in that area. And we have some of the best 
brains, in fact, they're some of the highly qualified people 
from East L.A. and these places that are helping us, putting 
this together. That one is, one architectural firm will handle 

The next step is an architectural firm that will 
handle which will be mostly the campus. I don't like to use a 
campus style, but a campus style, single story, kind of homes 
that we associate with probably Yountville, I think, would be 
the latest one that was just recently opened. 

SENATOR KNIGHT: Chula Vista you mean? 

SENATOR JOHANNESSEN: Excuse me, Chula Vista. 
I'm sorry, Yountville is 118 years old, I think. Forgive me. 

So, it makes sense that even though we be 


building, and the emphasis at this particular point is with West 
L.A., Saticoy, and Lancaster, but the footprint itself in the 
way we design will be also applicable to Fresno and Redding. 

Neither Fresno or Redding, Lancaster or Saticoy 
will be left out. They are -- the infrastructure's going to 
have to be for full workout, so we can increase later if we need 

So my feeling is, and I have explained that to 
you, I think, before, Colonel, that there is no way that I see 
with the West L.A. facility will in any way, shape, or form be 
completed before Lancaster. I suspect, if we are on timeline, 
and right now I'm good at pushing timelines, and right now I 
think that it'll be ready for occupancy and your inspection by 
the summer of 2006. And that will be the first one to open, I'm 
sure . 

CHAIRMAN BURTON: Will you still with us in 2006, 

[Laughter. ] 

SENATOR KNIGHT: You know, you're in second one 
that has made that comment today, and I'm going to be here past 

[Laughter. ] 

SENATOR KNIGHT: Building in Yountville and the 
other homes has lagged considerably behind the collections. The 
process by which we bill and collect, that's been a problem for 
many, many years. In fact, the billing at Yountville has been 
going down hill, or the collection, ever since '98. It took a 
plummet, you know, but budgeted, was pretty constant; in fact, 


increased a little bit. But the collections went down 

What are we doing about making sure that we bill 
and collect the appropriate funding from Medi-Cal and Medicare, 
from the various member fees, et cetera? We don't do a very 
good job at that. 


SENATOR KNIGHT: So, what are we doing? 

SENATOR JOHANNESSEN: Okay, the first problem 
that we have is that we have a computerized system that just 
don't work. 

SENATOR KNIGHT: When did we buy that system? 

SENATOR JOHANNESSEN: I have no idea, but it must 
be quite a few years ago. I'm not sure when that system was 

SENATOR KNIGHT: In 1999. It's a rather late 

SENATOR JOHANNESSEN: It's too complicated, and 
it is not user friendly. It has caused nothing but problems. 
As a matter of fact, the first thing I noticed when I took a 
look at the financial health of the department was that we were 
paying more in consultant fees to keep it running every year 
than we can buy a new system. So obviously, we are looking into 
that very carefully. 

And I'm not talking about a few hundred thousand. 
I'm talking about millions over the years. 

We, in order to solve that problem, we have had 
the Finance Department coming in to do audits. And we have 


discovered several things. One is that a lot of the billing 
fell behind and may not be collectable anymore. And that, for 
one thing, there has been no keying, if you will, on the 
computers for basis of drugs, which should yield us another 20 
percent of the billing, you know, for drugs. That was never 
charged for. 

So, yes, we have problems. 

SENATOR KNIGHT: Do we still contract with HMS to 
collect and train -- 

SENATOR JOHANNESSEN: We are -- right now I have 
a group together of highly professionally qualified people who 
are working over this to see what kind of changes we can make. 

But as long as this has been -- and this, 
Colonel, is really something that drives me up a tree, quite 
frankly, because a single source, a system designed by single 
sources, so you have to go to that source, to get things done. 
Which means there's tremendous — hundreds of thousands of 
dollars worth of consulting fees to go along with this as well. 

SENATOR KNIGHT: Do we still have a contract with 


The next system that will be put in place not 
only will be user friendly, but it will also be off-the-shelf 
kind of a system. It will not be this kind of a thing that 
we're dealing with right now. 

SENATOR KNIGHT: My understanding is that the 
system is not being fully utilized to the capacity for which it 
was designed or really purchased. And HMS should be providing 


that information. They're on contract to do that. 

SENATOR JOHANNESSEN: Well, I know they have 
people here from New York and a few other things. 

Rest assured, Colonel, this is not going to stand 
in the way that this is done right now. The system itself, I 
have been told that the system itself may be usable in Kaiser 
Permanente, but it is not usable in the situation that we are 
dealing with. It may be way beyond what we ought to be using. 

But we will take care of that one. That is on 
the list, and I would hope that in the next few weeks, we should 
be able to come up, at least on a trial basis in one of our 
homes, a system that will be working just fine. But it'll be 
done on the trial basis, and we will not install it until we 
know everything is right. 

SENATOR KNIGHT: The system you have was bought 
in '99 and 2000, and it had software updates last year. So, 
somebody must have known how to operate it, or was friendly with 
it, because they were able to request the updates. 

SENATOR JOHANNESSEN: Absolutely, I understand. 

And the only thing I can tell you is that I was 
very adamant about making changes in that department and the way 
we're doing things, the only thing I can tell you at the moment. 
But it will be taken care of, Colonel, I guarantee you that. 

SENATOR KNIGHT: The Governor has proposed to 
raise the fees for the members. 

What do you think about that? 

SENATOR JOHANNESSEN: Yeah. If you recall, the 
fees, it's not for all of it, but the fees basically was 55 

percent, and that Senator Chesbro -- and we put together a bill 
which actually took it down to 47-and-a-half percent, which is 
still, in my mind, too high, ought not to be. 

But if you're asking me what I feel about it, my 
feeling is that I understand the financial situation of 
Yountville and the homes. I understand we need the funding. 

But I hope that the administration will give me 
the opportunity to find savings in other areas, because this 
should not be. 

SENATOR KNIGHT: You're saying you don't support 

[Applause. ] 

SENATOR KNIGHT: I would go along with that, and 
I certainly don't support raising the fees, in particular if you 
can't collect them and you can't keep track of them. 

SENATOR JOHANNESSEN: There is a lot of things 
that's happening. It's a strange kind of laws that we're 
dealing with, Colonel, such that you are going to have to get 
rid of your funding before you can do things. I mean, it's 
strange, and I understand that. 

SENATOR KNIGHT: We have a requirement for DVBEs, 
Disabled Businesses, for 3 percent contracting. 

This last year it looks like they did 4.2 
percent, but I have words that indicate that there was some 
shenanigans pulled in terms of the identification of who those 
4.2 percent were, that they were using bogus or ZIP codes from 
out of state. 


SENATOR JOHANNESSEN: Colonel, I met with a lot 
of groups regarding that issue. And I don't know if you recall, 
I think it was AB 669, and also under AB 409, that set goals of 
not less than 6 percent for the veterans, the Small Business and 
Disabled Veterans Business Enterprises, I think it is. 

I'm not very good at this A, B, C that's going 
on. I've got to read up what it means. 

But what has happened is, first of all, I want 
you to know that as far as our administration is concerned, we 
are running right now about 23.42 percent, so we are certainly 
in compliance by far. 

The problem is that those people who need, 
perhaps, to get a little kick-starting, is, for example -- I'm 
going to get hit by this one -- General Services, which does 
most of the construction and all this stuff, they need to do 
something. The Forestry Service needs to do something, update 
perhaps, give themselves a little bit more of an interest in it. 

I have talked to the General Service. I've 
talked to these people, and the problem seems to be that the 
certifications, sometimes the certifications are fraudulently 
made. And they may hire somebody just in name only in order to 
become eligible. 

So, how many people do you have to investigate 
this? We had, as you recall, we had an IG, Inspector General, 
and we looked into some of that. And yes, there is some 
fraudulent things going on, but our department, of all the 
thousands of contractors out there, we have no one that can go 
out to basically investigate and enforce this issue. So, it may 


be that something we're going to have find a way to do that. 

But yes, it is fraud out there. Some it's 
substantial, yes. Are they misusing the system? Yes. 

And I watched it, touched it, felt it, and I know 
about it. I just don't know how to correct it without a lot of 
manpower . 

SENATOR KNIGHT: You have a lot of complaints 
from the veterans homes. Do you know how many you have a month? 

SENATOR JOHANNESSEN: No, I don't know how many 
we have a month, but we have too many. 

SENATOR KNIGHT: You have about a thousand a 

SENATOR JOHANNESSEN: Well, I don't think we have 
a thousand. 

SENATOR KNIGHT: Do you have problems with people 
coming me to talk about problems with the veterans homes? Do 
you have any problems with anybody coming to the Legislators, 
talking about the veterans homes? 

SENATOR JOHANNESSEN: No, no, no. I mean, that's 
a free speech issue. My gosh, you have people that come — 

SENATOR KNIGHT: Well, I'm more concerned about 

SENATOR JOHANNESSEN: — to Romero as well, and 
I've had long discussions with Nicole Parra about that. 

No, there is no problem with that. 

I do suggest, however, that we -- if they do come 
ro the Legislature, that we have the opportunity to get a call 
and say, "Hey, what's cooking? What's going on?" 


Now, as far as the -- and I'll tell you what 
we're doing right now, Colonel. And I think you'll appreciate 

I have instructed my staff as well as the Cal Vet 
Board that whenever they go to these homes for meetings, et 
cetera, they will live at the home. No more Hiltons. 

And the reason for that is, and I have spent a 
night both in Barstow and in Chula Vista. The reason for that 
is, you'd be amazed what you learn from these people when you 
break bread and have a cup of coffee before the birds start 
singing in the morning. You'd be surprised. And I have got an 
earful. And especially in Barstow, we did make some changes as 
a result of what was happening down there. 

Yes, we do get -- but you also, you know 
yourself, Colonel, there's military people, you know. There's a 
couple of things that you know for sure. One, you don't take 
away their cigarettes. Two, you don't take away their bottle, 
or they get a little cranky. So, you know that, and we all know 
that . 

SENATOR KNIGHT: At Yountville there's been a 
significant reduction in medical staff at Yountville. There 
have been complaints by the residents of: a lack of care; the 
requirements to move people long distances from Yountville; the 
ability to charge and collect fees for doctors and services 
within the local community. 

Is this a problem? 

SENATOR JOHANNESSEN: It was a problem. 



SENATOR JOHANNESSEN: It was a problem, I 
understand, several years ago or a couple years ago, where we 
were not exactly what you would call a good neighbor. We put 
our patients into these various places, and then we didn't send 
them the money to go along with it, and they were a little 
uptight about that, and I don't blame them. 

SENATOR KNIGHT: So that's not going on any 

SENATOR JOHANNESSEN: What's going on right now, 
Colonel, is that we have a hospital of sorts which I feel is 
underqualif ied to do the things that we need to do. Why? 
Because we don't have the latest in equipment. We don't have 
the type of -- in some cases we need physicians that are 
specialized in certain areas that we don't have. And for that. 
reason, we are transporting people out to general services 
hospitals, local hospitals, which if we had the proper 
facilities, perhaps -- which is a perhaps we never can do any 
more because of the cost, I guess -- but if we have had maybe a 
little more equipment that we could use, we may be able to 
charge off and actually be ahead of ourselves financially if we 
did that. 

But yes, that is a problem we're working with 
right now. But bear in mind also that there is no way that we 
can provide the type of diagnostics and the type of services for 
our veterans in any one of our clinics or in our hospital at 
Yountville because that, we need specialized service, and they 
deserve that specialized service, so we're going to have to send 
them to the major clinics. 


SENATOR KNIGHT: But we need appropriate medical 
staff there to make the diagnosis in order to send the people to 
some specialist. I understand. 

SENATOR JOHANNESSEN: Do you know how hard it is 
to get staff? 

SENATOR KNIGHT: I have been very critical of 
this department's administration and their operation of the 
veterans homes, and services delivered to our veterans. And 
I've visited all of the veterans home in the state, talked to 
many residents and staff. 

I want to make it very clear that when I am 
critical of the department, I am being critical of the 
management, not the staff that delivers the services to the 
veterans . 

This department has had management problems since 
before this administration. However, because the problems have 
continued, I lay blame on only one person, the Governor. 
Unfortunately, a mere shuffling of the management staff will not 
fix the problems. 

I have little confidence in Secretary 
Johannessen ' s ability to change the management mindset in this 
department . 

Thank you, Mr. Chairman. 


Senator Karnette. 

SENATOR KARNETTE: I'd like to comment about 
Senator Johannessen. I think you have that title forever. 

I like the way you get to the point. When you 


say you're going to do something, you're one of the most 
concrete people I've ever met as far as knowing what you're 
going to do, and telling us what you're going to do. For 
example, the billing. 

I'm real concerned that we get all the money 
that's due us, and I'm real concerned that I know exactly what's 
wrong. The fact that you spent the night in these homes, and 
Senator Knight has done the same, and visited, I think that 
really means something to me. 

I've also worked with you in a lot of areas, and 
I know when you get down to the nitty-gritty, you get down to 
the nitty-gritty. 

And I'm concerned about all these people who 
aren't really being treated as if they're really people. And I 
think you'll do that. That's the way my experience has been 
with you, nothing but positive. We haven't always agreed on 
everything, but I always knew what you meant, and you did what 
you said you were going to do. 

I have a question, though. There is a veterans 
hospital in my district. Are you familiar with it? It's near 
the college. I was there sometime ago. I'm not very familiar 
with veterans. I wanted to get some funds for it, but it went 
to West L.A. instead, which is okay. 

Are you familiar with that? 


SENATOR KARNETTE: Well, sometime when you visit 
there, will you tell me what's going on? I'll trust you. I 
know you'll tell me what's going on. 



SENATOR KARNETTE: I also want to be sure that 
the veterans -- you mentioned this, I think, when I was out. of 
the room -- but that the veterans that need care and help, 
particularly in the L.A. area, that they get it as soon as 
possible . 

And I want to know if you have any ideas, or you 
think of any legislation that you think can be introduced, I'd 
really appreciate it if you'd let me know. I really want to 
work with you on helping veterans. 

My husband is a veteran, and I want him to get 
best care also if he ever needs it, and many of my friends. I 
have many friends in Gardena who are veterans. There's a VFW 
there I think that's quite active. 

So, if there's anything you need in the 
Legislature, I'd really like to help you out. 

But can you tell me about the billing? That's my 
last question. What do you see? How are going to push these 
people to get that billing out? Are you just going to go in 
there and do like you did me when I was across the hall, just 
say, "What are you doing about this?" 

SENATOR JOHANNESSEN: What the system — a couple 
of questions, Senator Karnette. The first one is, of course, we 
need to bear in mind that veterans hospitals, of course, are the 
federal side of it. 

SENATOR KARNETTE: That's federal, so the state 
really doesn't relate to that then. 

SENATOR JOHANNESSEN: We do in the sense that we 


try to send our people there, and we're trying to, by 
contractual agreements, get them in there. But we have a little 
less to say on the federal side. 

Now, as far as the billing and collection, the 
key, and although I'm an engineer that went out with the slide 
rule -- 

SENATOR KARNETTE: Engineers are very down to 

SENATOR JOHANNESSEN: Yeah, but you know, I went 
down with the slide rule. I don't even know how to really 
operate a computer too well, but I do understand the principle 
of it. 

So, the key to it is to find a system, which you 
have one entry, for example. 

SENATOR KARNETTE: I see Senator Bowen, who's the 
expert, going like this. 

SENATOR JOHANNESSEN: Right, and what you do, the 
first entry dictates where everything goes from there. It can 
go to billing; it can go to reserve. And you get a report any 
time you want to print it out. 

In addition, you may be interested in knowing 
that we're also looking at bar coding. It has been used in the 
federal, but bar coding — and some of the unfortunate things 
that have happened is the, for example, in some cases, over 
medication. One physician gives a prescription, the next 
physician gives a prescription, and the guy fills them both, 
then we got a problem, or conflicting prescriptions. 

With the bar coding, if we get this bar coding 


agreement from the manufacturer, the one who sells us the drugs, 
that will automatically match the individual so that the doses 
and the prescriptions that the doctor writes will follow all the 
way through. 

CHAIRMAN BURTON: The bottom line is, we're 
working on it. 



Any other questions, Senator Karnette. 


CHAIRMAN BURTON: This won't be a question. I 
don't want a response. 

In our information, there was a study 
commissioned on veterans and homeless veterans, and we found out 
that there could be as many as 55,000 vets living in shelters 
and on the streets of California. 

I would hope at some point the Veterans 
Administration tries to figure out what we could do with that. 
And if there ever again is a veterans bond issue, that they put 
a piece in there to deal with the problems of homeless vets. I 
know there's a lot of them in my district. The older ones came 
out of the Vietnam War, and the younger ones came out of the 
Gulf War. 

Witnesses in support, Senator Bowen. 

SENATOR BOWEN: I can be brief because my T-shirt 
really is my testimony. 

For people who don't know, those of us who served 
with Maurice called him Mo Jo. And in Department of Veterans 


Administration, the answer to "Got MoJo" should be yes. 

We need somebody who has the kind of capability 
to get down to it, get things done, and not take any nonsense. 
A good stubborn Norwegian is just what we need. 

[Applause. ] 

CHAIRMAN BURTON: Brigadier General Ware. 

GENERAL WARE: Yes, sir. 

Mr. Chairman, distinguished Committee, I'm 
Brigadier General Ezell Ware, Chief Assistant Adjutant General 
for the California National Guard. 

In addition to representing that organization, 
I'm also representing the United States Association of Black 
Aviators, and also the Vietnam Helicopter Pilots Association. 

It is a great pleasure and an honor to recommend 
the confirmation of retired Senator Johannessen for the position 
of Secretary of Veterans Affairs. As many of my colleagues back 
here can attest, Senator Johannessen is actually the right 
appointment for the right position at the right time. 

I say that because I visit many of the veterans 
and veterans organizations, and all of them are very high on 
Senator Johannessen. I think in two words, Senator Johannessen 
is a veteran's veteran. 

So, I appreciate the opportunity to speak to you. 
I know that this man will serve the California veterans well. 
Thank you, sir. 

[Applause . ] 

CHAIRMAN BURTON: Larry Lattman, Chairman, Allied 
Council, Yountville Home, Member of the California Veterans 



MR. LATTMAN: Mr. Chairman, three years ago I 
bothered you, and you laid out a road map for me to follow, and 
here I am again. 

CHAIRMAN BURTON: You were supposed to turn right 
at Fairfield and head up to Red Bluff. 

[Laughter. ] 

MR. LATTMAN: No, you told me, you laid out a 
road map for me. I was scared. I was just elected Chairman of 
the Allied Council. I didn't know what to do. 

I asked for an audience to see you. You kindly 
consented to seeing me, and you told me what to do. And that 
road map that you laid out for us has paid a tremendous amount 
of benefits for the veterans living in the Veterans Home of 
California, and for that, I will always be eternally grateful to 
you, sir. 

[Applause . ] 

MR. LATTMAN: I appear now for three 
organizations. I'm Chairman of the Allied Council of the 
Veterans Home in Yountville, the largest veterans home in the 
world, 1100 strong, who's been serving veterans from every war 
except the Revolutionary War and the War of 1812. Yes, ma'am. 
April 1, we'll be 119 years old. 

And Californians can be justifiably proud of the 
social experiment that has worked and worked effectively. 
Through good times and bad times, we have been able to provide 
for our veterans, us elderly and disabled veterans, a sanctuary 


where they can go to live out the rest of their life. 

The profile of a veteran today living in the 
home, the average age is 79 years of age. They've got a 
five-year expectancy of life. And it's incumbent upon all of us 
to serve veterans. And we make sure that those five years are 
as comfortable as possible. 

I also have permission to speak for the veterans 
living in the Home of Barstow. And of course, the Governor 
appointed me to the Cal Vet Board, and the six members of the 
Board also have asked me to come up and speak on their behalf. 

We've come down to one thing. You're busy 
people. We are at perilous times. We're building a new 
generation of new veterans who 're going to have to come into the 
homes. What's happening in the Middle East, with a new set of 
sicknesses, with new psychological problems, and we need to get 
this Department of Veterans Affairs moving in the direction in 
which it should be going. 

I will tell you this. For the first time, we 
veterans living in the homes, disabled and sick veterans as we 
are, the first time we've had a chance for input to know, 
intimately know, the new Secretary. 

And we trust, and we know Senator Maurice 
Johannessen. And we want him to become confirmed Secretary of 
Veterans Affairs. 

Out of his committee, when he was committee 
Chairman of the Senate Veterans Committee, with Senator Soto and 
Senator Knight, who I've pestered for many years, too, and 
Senator Dunn, and Senator Chesbro, more meaningful legislation 


came out of his committee in the last four years than in the 
last 40 years in the history of California. 

[Applause . ] 

MR. LATTMAN: And today I brought up few of the 
veterans from the Veterans Home. It was hard for them to get 
here. A lot of them are in wheelchairs and walkers. 

Could you please raise your hands, my fellow 
veterans from Yountville. 

[Applause . ] 

MR. LATTMAN: We passed unanimously in our Allied 
Council and in Barstow the endorsement of Senator Johannessen. 
We know who he is. We want you to remember this, ladies and 
gentlemen. I'll make this brief. 

There are no Democrats, there are no Republicans 
in a fox hole. 

Thank you very much. 

[Applause. ] 


Major John Cleckner, Retired. 

That will be made part of the record. If you can 
summarize it, please, sir. 

MAJOR CLECKNER: Senators, my name is John 
Cleckner. I'm a retired Major, U.S. Army Special Forces. 

I have a prepared statement, but I will be brief 
and not cover it all because it's all written down there. 

I've worked with and known Senator Johannessen 
for almost 20 years. My service to my nation and as a veterans 
advocate has encompassed 46 years. Up until recently, I was the 


Chairman of the Board of the Northern California VA Systems of 
Clinics Advisory Council, Vets, and I'm also the past President 
of the Shasta County Veterans Affiliated Council, which 
represented over 65,000 veterans and dependents. 

I wanted to talk to you this afternoon about a 
couple of men that I knew from Scandinavia. There were great 
men, men of great courage, and I wanted to mention Secretary 
Johannessen ' s name along with these great heroes. 

As I stated, for almost two decades Senator 
Johannessen has fought for veterans and their issues on the 
battlefields of politics, like the men I was going to mention 
who were heroes and had served their country for many years. 
Senator Johannessen fought these battles from the City Hall of 
Redding, California to the hallowed halls of the Senate of the 
State of California here in Sacramento. 

His exploits and accomplishments as a California 
Legislator and statesman are equalled only by the outstanding 
service that he has given to the veterans during this period of 
time . 

During the years I've worked with Secretary 
Johannessen, and this is from the time he was the Mayor of 
Redding, California to the time he was the Chairman of the 
Shasta County Board of Supervisors, and his nine years as a 
Senator here in the State of California, he has always had time, 
and he's always given concern for veterans affairs. He always 
made his staff available on a nonpartisan basis. He always had 
his staff members well versed in veterans affairs and what was 
going on at the time. He was very approachable on all veterans 


issues, and in his approaches he was, again, always apolitical. 

I've worked closely with him on the Cal Vet Home 
Loan Insurance issue, and the Cal Vet educational legislation. 
And these two issues lasted for many years. I have also worked 
with him on the acquisition of Federal VA health care facilities 
in Northern California, the first State Veterans Cemetery in 
California, the Veterans Home Project that will build five new 
State Veterans Homes in California, and now the important cares 
issue that addresses veterans health care for the next 20 
years . 

I have known and worked with Secretary 
Johannessen for almost two decades, and I can say he never made 
me a promise that he didn't keep, and he never told me a lie. 
Secretary Johannessen ' s dedication to veterans affairs and 
legislation can only be characterized by saying that Secretary 
K. Maurice Johannessen' s courageous and aspiring leadership, 
valiant fighting spirit, and tenacious devotion to duty, honor, 
God, and country has ensured the veterans of California will be 
honored and receive the benefits of services they so richly 
deserve because of his personal dedication. 

And with the Board's permission, I would like to 
conclude by thanking Secretary Johannessen for all he has done 
for our American veteran heroes, and say God bless you, and I 
know you will continue to do this as California's Secretary of 
Veterans Affairs. 

CHAIRMAN BURTON: Thank you, sir. 
[Applause . ] 

CHAIRMAN BURTON: Charles Parnell, State 


Commander of the American Legion and fighter for a free Ireland. 

MR. PARNELL: Thank you. 

CHAIRMAN BURTON: Are you a relation, sir, to the 
great Charles Parnell? 

MR. PARNELL: Yes, I am. 

CHAIRMAN BURTON: Good for you. 

MR. PARNELL: Charles Stuart. I'm a Charles 

Thank you for mentioning that. I'm very proud of 
my Irish heritage. 

Mr. Chairman, Members of the Committee, I would 
like to make a comment that the Department of California, or the 
veterans of California desperately need a permanent Secretary 
for the California Department of Veterans Affairs. We certainly 
have a nominee right now and a Secretary Johannessen. 

He understands the veterans issues. He is a 
veteran. He understands how we think. He understands our 
causes, and he understands our needs. He has championed many 
veterans issues and causes. As you know, he has sponsored many 
bills in favor of and supporting the veterans. 

We trust him. When I say "we, " I say the 
veterans. He has credibility. He says what he means and he 
means what he says. And these are proven by his actions in the 
past . 

We have great confidence in him, and we certainly 
look forward for his leadership in dealing with the veterans 
issues and of our causes in the State of California. 

So therefore, I do speak in support of his 


nomination as Secretary of the California Department of Veterans 
Affairs . 

I'd like to thank you for his consideration, and 
certainly that you will nominate him as our new Secretary. 

CHAIRMAN BURTON: Thank you, sir. 
[Applause . ] 

CHAIRMAN BURTON: John Lowe, State Adjutant, VFW. 

MR. LOWE: Also, Mr. Chairman, I have a prepared 
statement I'm passing around, so I'm just going to highlight 
some of the things. 

CHAIRMAN BURTON: Thank you, we'll make that part 
of the record. 

MR. LOWE: Mr. Chairman, Members of the 
Committee, distinguished guests, fellow veterans, and on behalf 
of our State Commander, I'm John Lowe. I'm the State Adjutant 
of our organization, Veterans of Foreign Wars, United States, 
Department of California. 

As one of the state's largest and most 
influential veterans service organizations, it's with great 
pride that we rise in support of Maurice Johannessen for the 
position of Secretary, Department of Veterans Affairs. 

As a State Legislator, he has championed veterans 
issues, and we believe he will do so as head of this 
department . 

We have been critical of the Department of 
Veterans Affairs in the past. And though we support this 
current leadership, let it be known that we will continue to be 
watchful over how our entitlements are distributed, and the 


services are provided to California veterans. 

The veterans service organizations have long been 
the voice of those who have had none, and under the leadership 
of Maurice Johannessen, we hope the Department of Veterans 
Affairs will take into account the views and suggestions and 
services that we of veterans service organizations have to 

Although the veterans homes is an important issue 
in this state right now, but the Department of Veterans Affairs 
has many other services provided to veterans. And we believe 
that if the department is finding it is a challenge to manage 
and administer these programs, that they should seek our 
assistance as veterans service organizations, because it's what 
we've been doing for veterans in the state for over a hundred . 
years without any county, state, and local subsidies. 

Although many of our veterans are getting older, 
we must not forget there are many younger veterans who are also 
in need of services that the department provides, such as the 
Cal Vet Home Loan Program and educational programs. 

And as we are on the verge of war, we need to be 
ready for the multitude of veterans returning home, seeking 
these entitlements. Let's put a little bit more emphasis on the 
variety of programs offered, and perhaps look towards new ones 
10 assist the younger vets. 

California has always taken care of its residents 
who stand up for our nation's defense, and I ask you to 
recognize that not all veterans are aged and disabled. Our 
California veterans deserve an advocate, and we as an 


organization will continue to be that advocate, and we look 
forward to working with Secretary Johannessen. 

Thank you for your time today, and God bless 
America, God bless our troops. 

[Applause . ] 

CHAIRMAN BURTON: Larry Brooks, President-elect, 
Disabled Veterans Business Enterprises. 

MR. GREENE: Mr. Chairman, my name is Michael 
Greene. Larry Brooks and I were here together, and he stepped 
out of the room. He was having a coughing fit. 

I'm the Secretary of the California DVBE 
Alliance, and I'll just speak in his place. 

We have been, the Disabled Veterans Business 
Enterprise Alliance is a statewide organization. It's been 
around since 1989. We have been working to see the full 
implementation of California's Disabled Veterans Business 
Enterprise program, which sets a goal for participation in state 
contracts by disabled veterans, certificated by the state, for 
up to three percent. Senator Knight has mentioned that 

We visited with Senator Johannessen several weeks 
ago. He expressed interest in this and concern about it. We've 
worked with him in the past through his chairmanship of the 
Senate Veterans Affairs Committee. 

We're very pleased to endorse his appointment as 
Secretary of the California Department of Veterans Affairs. 

CHAIRMAN BURTON: Thank you, sir. 
[Applause . ] 

CHAIRMAN BURTON: John Canfield, past 
Legislative Director, VFW, Department of California. 

MR. CANFIELD: Mr. Chairman, Members of the 
Committee, I'm John Canfield. I'm a World War II ex-paratrooper 
with the 82nd Airborne Division. And I can just imagine -- 

[Applause . ] 
MR. CANFIELD: Mr. Chairman, I can just imagine 
the feeling of those young paratroopers today. In a few hours 
they may be moving into combat. 

And folks, from personal experience, and I know 
some people have had experience, combat is no place to be for a 
future because some of these young people are not going to have 
a future. 

Mr. Chairman, the reason I'm here is that I'm 
Vice Commander of the Veterans Affiliated Council of Sacramento 
and Vicinity, and we are made up of posts from all different 
veterans organizations and auxiliaries. As such, we're an 
independent group. We aren't led by anyone. 

This subject today came up at our last meeting, 
and a motion was made unanimously to support the candidate for 
the Secretary for the Department of Veterans Affairs, Senator 
Johannessen. It was so unusual for the unanimous vote that one 
guy stood up and made the motion that the record show for a 
change, first time in my memory, that it was an unanimous 

Mr. Chairman, I've been representing veterans for 
various groups and organizations for at least 30 years here in 
the Capitol. And I have been very critical of the Department of 


Veterans Affairs, much to the displeasure of my wife, who is 
also a veteran, Army nurse from don ' t-say-what-war, but it was 
my era. 

[Applause . ] 

MR. CANFIELD: She is not comfortable to see my 
name in articles criticizing anyone, but Mr. Chairman, I had 
ample opportunity to criticize, but I feel it was constructive. 

A few weeks ago, I met a past Secretary of the 
Department. He introduced me to a lady as, quote, "the meanest 
man in Sacramento." And the lady looked at me and said, "He 
doesn't look so mean to me," so I had to compliment her on her 
excellent judgment, her willingness to think for herself. 

But it's true, Mr. Chairman, the Department of 
the Veterans Affairs has not served the veterans as well as they 
should have. 

And I have known the Senator for, I think, nine 
years. And in all that time, he has authored legislation for 
the benefit of veterans. And the thing that impressed me about 
him is that not only was he willing to — I won't wave my hands 
too much, Senator -- the thing that impressed me, Mr. Chairman, 
is that he was always willing to work that legislation. He did 
not just introduce legislation for the folks back home and then 
let the legislation die without making an effort. 

So, Mr. Chairman, I'm going to quit while I'm 
ahead. I think that Senator Johannessen is the man for the job. 
If the problems in the Department of Veterans Affairs can be 
solved, and there are serious problems, Senator Johannessen is 
the man to do it. All ready the appointment of the chief second 


1 in command, Cheryl Schmidt, a tremendous appointment. I won't 

2 embarrass Cheryl if she's still here, but it's a way to go. 

3 And Senator, I offer my support, my 

4 congratulations, and I just urge the Committee to approve the 

5 nomination. 

6 [Applause. ] 

CHAIRMAN BURTON: I think just for the record, I 
thought General James Gavin was not only a great general but a 

9 great American and a great human being. Looked like he came 

10 right out of central casting. 

11 For the record, this Committee has been 

12 responsible for getting rid of two, if not three, of the heads 

13 of this, the Department of Veterans Affairs, because we refused 

14 to confirm them, or asked Governor to withdraw them because 

15 clearly they were not doing the job that they were supposed to 

16 do. So, we used to hear the cries of the veterans, and we 

17 listened. Actually, even if we didn't hear them, we did our own 

18 research and found out that they were not qualified. 

19 Other witnesses in support, briefly. 

20 MR. SWANN: I want to thank the Senate Rules 

21 Committee. Actually, this is going to be very hard, Senator 

22 Burton, because I'm blind, to read this. 

23 CHAIRMAN BURTON: We have it for the record. 
14 MR. SWANN: But I'm going to be very brief. 

2 5 CHAIRMAN BURTON: Why don't you just in your own 

26 words . 

27 MR. SWANN: Yeah. I'm going to speak from the 

28 heart and just say that I'm speaking today on behalf of gay 


veterans and Blinded Veterans of America. 

I am grateful that you're giving a blind veteran 
like myself, living with HIV and AIDS, an opportunity to 
testify. And I want these constituencies to go on record in 
support of this confirmation. 

Senator Johannessen believes a veteran is a 
veteran is a veteran. The Senators -- many of you may not be 
aware that the U.S. Department of Veterans Affairs is the 
largest single provider of HIV medical care in the United 
States. That means that the VA provides more HIV care than Blue 
Cross, or Kaiser, or any other group. 

There were times in the early days of this 
epidemic, as Senator Burton well knows, that at the VA 
hospitals, the nurses wouldn't bring the food into the room if 
you were HIV. Those days are over. 

Senator Johannessen has said, and he's pledged to 
our veterans that regardless of your diagnosis, you will receive 
the equal benefits and equal access to the care that you 
deserve . 

We know that in combat, when you're wounded, your 
blood runs together, and it's all the same color. 

So, on behalf of the gay veterans and lesbian 
veterans of this state, we support this confirmation because, as 
you know, under this administration, and with the leadership of 
Senator Burton, Senator Karnette, Senator Kuehl, and others, gay 
and lesbian veterans finally have a seat at the table. Not 
special rights, not a quota, just for the first time, the doors 
have been opened, and we can at least sit at the table and say 


what is going on. 

And also, the last point on behalf of our blinded 
veterans, being blind is devastating. Senator Johannessen wants 
to support rehabilitation, he wants to support our special 
needs. So I'd like to ask, you know, this is a difficult time 
in America. War is imminent. There are terrorists out there, 
and there are people in other foreign countries that are hateful 
to America. 

I think we need to send a message today, and I 
hope that the Committee will consider a unanimous vote, because 
we need to send a signal to the combat troops and to our 
veterans that when it comes to these issues, we're united. 

The last point, yes, I'm founder of America's 
only Democratic Veteran Caucus. Yes, I was the Co-chair of the 
Salute to Veterans at the 2000 Democratic National Convention. 

I've never spoken in favor of a Republican 
before. But let me say that veteran issues are too important to 
be made partisan. A veteran is a veteran is a veteran, whether 
you're gay, straight, Catholic, Methodist, Democrat, or 
Republican, it's irrelevant. We're all Americans. Let's have a 
unanimous vote today, and let's get behind the new Secretary, 
and let's serve our troops and our veterans. 

Thank you. 

[Applause. ] 

CHAIRMAN BURTON: Thank you, sir. 

Identify yourself for the record, please. 

MR. HARPER: Thank you very much, Mr. Chairman 
and Committee. My name is Don Harper. I'm President of the 


California Association of Veterans Service Agencies throughout 
the State of California. 

We are a network, a nonprofit of community-based 
organizations that represent the faces of homeless veterans, 
those that have special needs, and veterans that we get into 
training and housing programs in California. 

I'm also a Vietnam veteran, a Marine Vietnam 
veteran. I came back from Vietnam and had a lot of problems 
myself adjusting back to the civilian life. And we do a lot of 
work with homeless veterans in the State of California. 

I appreciate your comments, Mr. Burton, on the 
study that was done by the department make sure that homeless 
veterans are in fact treated like any other veterans. In our 
view, they are missing in America in many ways, and they are the 
homeless veterans. Quite frankly, I'm probably the only voice, 
with a few other folks, that speak for homeless veterans in 
different communities and statewide issues. It is a major, 
major concern for us as homeless veterans. 

My statewide group met with Senator Johannessen 
about two months ago. We had a good long meeting. He wanted to 
learn more about homeless veterans: What are the problems with 
them; what are the education; what are the solutions for them. 
And he gave us our commitment to look into the issue of helping 
homeless veterans throughout the State of California. I want to 
thank him for that. 

I learned in the Marine Corps in Vietnam, you 
never leave anybody behind, nobody behind. I think every 
veteran in this room appreciates that, and this includes 


homeless veterans. 

As many of you might know, of the homeless 
population in California, one-third of the homeless population 
at large, one-third are homeless veterans. So, they are a 
significant part of the veteran population. 

I had the commitment from the Secretary and the 
Cal Vet Board to work harder with this on serving homeless 
veterans . 

With that in mind, we strongly endorse the new 
Secretary for the Department of Veterans Affairs. Thank you. 

[Applause. ] 

MR. REARDON: My name is Bill Reardon. I'm 
representing the California Association of County Veteran 
Service Officers. We're county employees. We're in 56 of 
California's 58 counties whose sole purpose is to assist 
veterans, their dependents, and their survivors. 

I have a couple CVSOs in the back, if they'd like 
to raise their hands in acknowledgement. 

Our association is strongly in support of this 
nomination. We've had the opportunity to work with Senator 
Johannessen on legislative issues of concern to our association 
and to the veterans of California. 

We're also in the unique position that we help 
administer some of the programs for the department, the specific 
one is the California Dependents Fee Waiver Program. The CVSOs 
throughout the state administer that on behalf of the 
department. I believe that over 17,000 dependents of disabled 
veterans were able to receive tuition waivers at California 


schools last year. 

We also get -- 

CHAIRMAN BURTON: We're aware of your duties. We 
would like to hear your comments on the Secretary. 

MR. HARPER: Yes, sir. 

Working with the Senator, we've seen that he does 
indeed care for the welfare of the veterans by virtue of the 
legislation he's introduced and his willingness to listen to the 
concerns that we bring him as individual CVSOs and also as 

We think he will continue that in the future as 
the Secretary. Therefore, we strongly recommend an Aye vote for 
his confirmation. 

Thank you. 

[Applause. ] 

MR. AMARO: Good afternoon, Mr. Chairman and 
Members. My name is Allen Amaro. I'm a past Legislative 
Chairman for the Department of California for the American 
Legion; committee member, Legislative Department of California 
for the DAV. 

I'm here in support of Senator Johannessen, and 
I'm also a DVBE, which is a Disabled Veteran Business 
Enterprise, I'm in business for myself. 

I look forward to working with Senator 
Johannessen. I've worked with him in the past to help us 
support this DVBE program, and bring back the integrity and the 
help that's needed to make this program go forward. We look 
forward to help from Mr. Johannessen. 


[Applause. ] 

GENERAL MATTSON: Mr. Chairman, Members of the 
board, I'm Brigadier General Don Mattson. I'm the Director of 
the California State Military Museum. 

The reason I'm here not only to talk about 
veterans affairs and this gentleman, who we figure is one of the 
best ones that you have for the job today, but if it wasn't for 
Senator Johannessen, we wouldn't have a State Military Museum. 

I've brought several people along. Would you 
please raise your hands, those people who are affiliated with 
the Museum. 

[Applause . ] 

GENERAL MATTSON: Senator Johannessen is 
responsible for making this institution a permanent state 
feature. We have three million veterans in the State of 
California without an official museum. 

And I'm here to thank him and endorse him for the 
this position of the Secretary of California's State Veterans 
Affairs. He's a wonderful fellow. He's a veteran. He 
understands it. He looked at it from one end, and now he's in 
at the other end. 

[Applause . ] 

COLONEL HOM: Mr. Chairman, Members of the 
Committee, I'm Benton Horn, U.S. Army Colonel, Retired. 

I was also a National de Camp for the Veterans of 
Foreign Wars of the United States. I was a past Post Commander 


of the American Legion and VFW organizations, and also represent 
many Asian Pacific American groups. 

There are basically two reasons why my comrades 
and I support the confirmation of Secretary Johannessen. Number 
one, as echoed by many of those before me as far as their 
sentiments are concerned, that number one, he has shown great 
passion and abiding interest in the health and welfare of both 
veterans and their families. 

Number two, his magnificent legislative record 
speaks for itself in terms of how he translates that passion and 
interest into programs for war veterans of the present and the 
past . 

So, we like to support his confirmation in the 
interest of his advocacy for his opportunity to rectify many of 
the mistakes or inefficiencies that have been reported by the 
Department of Veterans Affairs, and that this great potential 
for him to realize those aspirations of the American veterans of 
our wars. 

Thank you -- 

CHAIRMAN BURTON: Thank you, sir. 
[Applause. ] 

COLONEL GORRE: Mr. Chairman I'm Lieutenant 
Colonel Gorre, United States Army, paratrooper also, retired in 
August 1972. 

I'm a combat veteran of Vietnam and Korea. 

I feel that this meeting has to realize that time 
is of real essence for the veterans. I'm saddened to say that 
another veteran died today. As a matter of fact, 1,200 veterans 


of World War II are dying on a daily basis nationwide. So time 
is of essence. 

I'm also a 100 percent disabled veteran rated by 
the VA. I wouldn't be here today if not for the Veterans 
Administration. I'm all of 73 years old and retired in 1970. 

We need a man who has vision, courage, 
determination to accomplish the goals that we need to be done 
for our veterans. And I am proud to say that I've known Senator 
Johannessen for a very short time; however, I know his support 
for the veterans, and I strongly support his confirmation. 

Thank you, Mr. Chairman. 
[Applause . ] 

CHAIRMAN BURTON: Identify yourself for the 
record, please. 

COLONEL GREENE: Ivann Greene, Lieutenant 
Colonel, Retired, 18th Airborne Corps, 101st Airborne. 

I bring a different perspective, Mr. Chairman and 
Senators, to this hearing today. I'm a staffer of the 
California Department of Veterans Affairs, and I represent a 
number of individuals who are not only in support of this 
nominee for Secretary of Veteran Affairs, but we bring a 
perspective that we are excited for this particular person. 

Sir, we've experienced a number of negatives over 
the last four, to five, to six years at this agency. And what 
I'm here to say, sir, on behalf of my colleagues is that there 
is a sense of excitement, there's sense of commitment, there's a 
sense of desire to serve former Senator Maurice Johannessen. 

I wanted to bring that to bear here, sir, because 


I know it is a different perspective. I've personally taken 
time off to make this statement today on behalf of my colleagues 
because they could not be here. But I wanted to make that clear 
today, sir, that we are in total support of this particular 
person, and we're very excited for our future. 

Thank you, sir. 

[Applause . ] 

MS. METCALF-FOSTER: My name is Delphine 
Metcalf-Foster . I'm the Junior Vice Commander for the Disabled 
American Veterans, first female in 81 years here in California. 

I support Senator Johannessen. Without vision, 
we will perish. The people will perish. 

The Senator's track record has showed he has 
vision. He does not just talk the talk, but he walks the walk. 
And I support him wholeheartedly. 

Thank you. 

[Applause . ] 

MR. CONATY: Good afternoon, Senator. My name 
is Pete Conaty. I'm here representing my clients, California 
State Commanders Veterans Council, 20 military organizations in 
the state. 

CHAIRMAN BURTON: On behalf of yourself and 
Colonel Conroy? 

MR. CONATY: Yes, on behalf of Assemblyman Mickey 
Conroy, President of the Armed Forces Retirees Association, and 
also here personally myself. 

In the 17 years I've been associated with this 
building, either in the staff or as a lobbyist, I have followed 


veterans affairs, both personally and professionally, since I am 
a retired military member, a disabled veteran, a Vietnam War 
veteran, and a proud member of the 101st Airborne Division, 

At any rate, and on a personal note, I must point 
out that Major John Cleckner, who testified earlier, he and I 
are both graduates of the Officers Candidates Course at Fort 
Benning, Georgia, OC 1-66. So, let's give a round hand for OCS 
graduates . 


MR. CONATY: In the 17 years I've followed the 
Department of Veterans Affairs, Senator Johannessen is the most 
qualified person I have seen yet to be nominated and to serve as 
the Secretary. 

Thank you very much. 

[Applause . ] 

MR. MARKARIAN: Senator Burton, Members of the 
Rules Committee, I'm Ron Markarian from Fresno, California. I'm 
the President of the Central California Chapter Association of 
the U.S. Army and a former member of the California Veterans 

And during my tenure on that board, I had the 
opportunity to get to know and work very closely with Senator 
Johannessen. I know that he is totally committed to the welfare 
of the veterans of this great State of California, and I 
strongly urge that he be confirmed. 

Thank you. 

[Applause. ] 


MR. KANELOS: Good afternoon, ladies and 
gentlemen. My name is Gus Kanelos. I'm a legislative advocate 
and lobbyist for veterans in the State of California, and I also 
represented the 18th Congressional District on veterans. 

I'm here today because of one gentleman, the 
gentleman to my right, the honorable and distinguished Senator 
Johannessen and the honorable Mr. Burton. 

I also run UVAC, the Unaffiliated Veterans 
Advocate Coalition, the fastest growing veterans organization in 
the state and will be in the nation. 

I'm here to ask that we do confirm Senator 
Johannessen because California has three-and-a-half million 
veterans. I've worked from one end of the state to another, and 
I've worked in eleven western states. California has the worst 
record when it comes to the maintenance and upkeep of our 
veterans who are interred in cemeteries. I'm speaking now not 
of federal cemeteries. 

When we go down to Santa Nella every Memorial Day 
and Veterans Day, and we honor our veterans, and I'm proud of 
that. What makes them any different than the veterans who are 
lying here in unmarked graves in California, with weeds over 
their head, and without markers, when we have the fellow who 
raised the Bear Flag over California with no marker on his 
grave? He's a veteran. 

We have eleven veterans buried underneath a 
highway. The Governor knows this. He hasn't done anything 
about it, and our veterans are really to blame because they 
should stand up. They're willing to fight for their country, 


they're willing to shed their blood, but they're not willing to 
stand up and fight for themselves. 

We are here today to see that the Veterans 
Administration do what no other administration, Veterans 
Administration, has done here, and that's to represent our 
veterans. Let's give them honor and the dignity they deserve. 

Thank you. 

[Applause. ] 

MR. REECE: Mr. Chairman, Members of the 
Committee, I'm John Reece. I'm hear representing the State 
Commander for American Veterans. 

Very simply, Secretary Johannessen has the full, 
unqualified, unanimous support of AMVETS throughout the State of 
California . 

Thank you. 

[Applause . ] 

CHAIRMAN BURTON: Witnesses in opposition? 

Senator Johnson. 

SENATOR JOHNSON: Thank you, Mr. Chairman. 

I'd like to make a few comments, and I promise 
that I'll be brief. 

Mr. Chairman, as I've said on many occasions, 
I've always believed that a governor, any governor, ought to be 
able to appoint whoever he or she wants for his or her team. 
And Mr. Chairman, you can count on the fingers of one hand the 
appointees of Governor Davis that I have opposed. I voted to 
confirm his choices in spite of the fact that so often their 
only qualification appears to be that they're political 


supporters of the Governor. 

I realize fully that what I'm about to say is not 
going to be popular, but the Department of Veterans Affairs is a 
troubled department, and it's too important. We owe a debt of 
gratitude to our veterans that we can never adequately repay. 

So, Maurice, I'm going to oppose you. 

I don't doubt for one moment the sincerity of the 
American heroes who testified on your behalf. But very frankly, 
I don't think they know you as well as I know you. 

The truth is that only two people in this room, 
Senator Knight and myself, have had to sit for years in Senate 
Republican Caucuses and listen to your little pep talks about 
how we've all got to stand together; we've all got to stick 
together; and we've all got to hold the line on the budget and 
taxes; and we've got to oppose the Governor. 

And then we watched you go out on the Floor of 
the Senate and do exactly the opposite thing. 

Maurice, I'm talking straight to you, my friend. 
You know that it was common knowledge in the halls of this 
Capitol last summer that you would vote for the Governor's 
budget, that you would provide the 27th vote for that budget. 
And it was common knowledge in the halls of this Legislature 
last summer that you would receive this specific appointment as 
a reward for that vote. 

Now, you've denied it, and the Governor's denied 
it, but frankly, your denial just lacks credibility. 

The Governor's usual practice in making 
appointments such as this is to put out a short press release, 


quietly, a paragraph or so. But in your case, he assembled a 
large crowd, and he extolled your virtues for about ten minutes, 
and then he personally swore you in. 

That ceremony was an infomercial aimed at 
Republican Legislators, and the message was this: Sell out your 
principles, sell out your promises to your constituents, and 
you, too, could be rewarded. 

I have to say that such a blatant political 
payoff is absolutely no way to choose the head of a department 
that is as troubled as the Department of Veterans Affairs. 

Again, I don't doubt for a moment the sincerity 
of all these good people who've testified on your behalf, but 
I'm going to vote no because I know you. 

CHAIRMAN BURTON: Well, I would just like to say 
except for the fact that the Veterans Department is in very 
serious trouble, I do disagree with the comments of my friend 
and my colleague. 

I would move the nomination. 

SECRETARY WEBB: Senator Karnette. 


Karnette Aye. Senator Knight. 


Knight No. Senator Romero. 


Romero Aye. Senator Johnson. 

SECRETARY WEBB: Johnson No. Senator Burton. 



SECRETARY WEBB: Burton Aye. Three to two. 
CHAIRMAN BURTON: Congratulations. 
[Applause . ] 
[Thereupon this portion of the 
Senate Rules Committee hearing 
was terminated at approximately. 
3:20 P.M. ] 




I, EVELYN J. MIZAK, a Shorthand Reporter of the State 
of California, do hereby certify: 

That I am a disinterested person herein; that the 
foregoing transcript of the Senate Rules Committee hearing was 
reported verbatim in shorthand by me, Evelyn J. Mizak, and 
thereafter transcribed into typewriting. 

I further certify that I am not of counsel or 
attorney for any of the parties to said hearing, nor in any way 
interested in the outcome of said hearing. 

IN WITNESS WHEREOF, I have hereunto set my hand this 

> j 

day of 

, 2003 

Shorthand Reporter 


Confirmation Hearing Remarks on behalf of 
Secretary K. Maurice Johannessen's nomination 

There are two great Scandinavian Heroes that I 
personally served with in Special Forces. I think it 
would be most appropriate now to mention these 
great soldiers in the same breath with Secretary 
Johannessen and add him to this special group of 

Colonel Keravuori was my Special Forces 
Commander when I returned from Officer 
Candidate School. He was a great man, who 
taught all of his young Lieutenants what it meant 
to be a Warrior. He was Dignified, Intelligent, a 
proven Leader of men and a Hero, not only in the 
American Army, but also during WWII fighting 
the Nazis in Scandinavia. He was an original 
member of Special Forces and served over 40 
years in the American Army. His service during 
WWII is legendary. He had the equivalent of 7 
American Silver Stars for his heroic actions 
against the Germans. 

Captain Larry Thorne was Special Operations 
first Casualty in Vietnam while flying a secret 
missions out of Laos. His exploits during WWII 
resulted in Knighthood, and being memorialized 


in many Military History Books. His unique 
ability to defeat the Russians & Germans at every 
turn won him not only some of Scandinavia's 
highest military decorations it also included the 
equivalent of two America's Medals of Honor. 
His unconventional exploits also opened the doors 
for him to come to America and become one of the 
original Green Berets during that unit's inception. 
His expertise and military knowledge of Guerrilla 
Warfare contributed greatly to the establishment 
of Special Forces. 

These were men of great courage and dedication; 
Men of Scandinavia like K. Maurice Johannessen. 

You can be a hero in many ways. For almost two 
decades Secretary Johannessen has fought for 
Veterans and their Issues on the battlefields of 
Politics from City Hall in Redding CA to the 
Hallowed Halls of the Senate of California here in 

His exploits and accomplishments as a California 
Legislator and Statesman are equally as heroic as 
those aforementioned men of Scandinavia who 
came to America and continued to serve their 
adopted Country with honor & distinction. 


During the years I worked with Secretary 
Johannessen, and this is from the time he was the 
Mayor of Redding Ca, to the time he was 
Chairman of the Shasta County Board of 
Supervisors to his nine years as a Calif. State 
Senator, he always had time and concern for 
Veterans Affairs. He made his staff available and 
on a non-partisan basis. He always had staff 
members that were well versed in Veterans 
Affairs available. Again his approach to 
Veteran's Issues were always "A" Political. 

I have worked closely with him on the Cal-Vet 
Home Loan Insurance Issues, Cal-Vet 
Educational Legislation which continued for many 
years, and on the acquisition of Federal VA Heath 
Care facilities in Northern California, the First 
State Veterans Cemetery in CA, the Veterans 
Home Project that will build 5 new State Veterans 
Homes in CA, and now the important CARES 
Issue that addresses Veteran's health care for the 
next 20 years. 

I have known and worked with Secretary 
Johannessen for almost two decades and I can say 
he never made me a promise he didn't keep and 
he never told me a lie. 


Secretary Johannessen's dedication to Veterans 
Affairs and Legislation can only be characterized 
by saying that "Secretary K. Maurice 
Johannessen's Courageous and Inspiring 
Leadership, Valiant Fighting Spirit and Tenacious 
Devotion to Duty ~ Honor ~ God & Country has 
insured that the Veterans of California will be 
honored and receive the Benefits and Services 
they so richly deserve because of his personal 

With the Boards permission, I would like to 
Thank the Secretary for ALL he has done for our 
American Veteran Heroes and say "God Bless 
You", I know you will continue in this way as 
California's Secretary of Veterans Affairs! 


Confirmation Hearing - Sec. Vet Affairs. California Senate Rules Committee - March 19, 2003 
Page 1 of 3 

Mr. Chairman, Members of the Committee, Distinguished Guests and Fellow Veterans, I am representing the 
Veterans of Foreign Wars of the United States, Department of California. 

As one of our States largest and most influential veteran service organizations, it is with great pride that we rise 
in support of Maurice Johannessen for the position of Secretary of the Department of Veterans Affairs. As a 
State legislator, he has championed veteran's issues and we believe he will do so as head of the Department. 

We have been critical of the Department of Veterans Affairs in the past, and though we support this current 
leadership, let it be known that we will continue to be ever watchful of how our entitlements are distributed and 
services are provided to California's Veterans. 

Veteran Service Organizations have long been the voice for those who have had none, and under the leadership 
of Maurice Johannessen we hope the Department of Veterans Affairs will take into account the views, 
suggestions and services that we as a VSO have to offer. 

Each year our Service Department assists in bringing in millions of dollars in revenue to our States veterans, 
dollars that are being put back into our local and state economy. Our members have also logged in hundreds of 
thousands of volunteer hours at VA hospitals and various other community activities in support of veterans. 

However, a concern of ours is that we believe Veteran Service Organizations (VSO) are apparently not taken 
into consideration by the Department when dealing with veterans affairs. Much of the emphasis and resources 
are provided to the Counties through the Association of County Veteran Services Officers. 


( cuifirmation Hearing - Sec. Vet Affairs. California Senate Rules Committee - March 19, 2003 
Page 2 of 3 

Our organization in addition to other VSO's are set up to provide assistance and information to veterans through 
its \ asi resources, to include monthly magazines, news letters, e-mail lists, and through network of local 
Chapters'' Posts. We estimate the veteran population we serve along with the other major VSO's is in the area of 
ova one half million California Veterans. 

The research shows that although not all veterans join a VSO, the majority that do are active and concerned 
about their entitlements and are high propensity voters. 

We as well as other VSO's provide services to veterans through our offices located throughout the State such as 
filing claims for pension and disability with the Department of Veterans Affairs. 

This assistance brings millions of dollars back into our local economies, yet the VSO's are completely self 
sufficient, as opposed to the Association of County Veteran Service Officers, who receive their funding from 
State and other municipal avenues. We feel the Department of Veterans Affairs should take our work into 
consideration when preparing statistical reports for the State Legislature. You might find that we as 
organizations significantly increase the amount of benefits provided each year to our States Veterans by more 
than 150 million dollars in addition to what the Counties provide. 

There appears to be a direct link between the CA Department of Veterans Affairs and the County Service 
Officers, yet very little cooperation with our organizations. The CDVA has provided "symposiums" for the 
organizations which have been little more than self serving promotion rather than an opportunity to air 
grievances, discuss ideas and present information. 

Confirmation Hearing - Sec. Vet Affairs. California Senate Rules Committee - March 19, 2003 
Page 3 of 3 

These issues, we hope, will change under the new leadership. Over the years there have been calls for complete 
re-organization, and concerns about our State Veterans Homes yet shuffling around the problem does not solve 

The Department of Veterans Affairs should not just concentrate on the Veterans Homes or the aged and elderly 
veteran, although these are important areas, the State has many services provided to Veterans and if the 
Department finds it is difficult to mange and administer all of these programs they should seek our assistance, 
because it is what we have been doing for over a hundred years without state, county, or local subsidies. 

Although many of our veterans are getting older, we must not forget that there are many younger veterans who 
are also in need of services that the Department provides, such as the Cal Vet Home Loan program and 
Educational programs. And as we are on the verge of a war, we need to be ready for the multitude of veterans 
returning home seeking these entitlements. Let's put a little more emphasis on the variety of programs offered 
and perhaps look towards new ones to assist younger vets. California has always taken care of its residents who 
stand up for our Nations defense. I ask you to recognize that not all veterans are aged and disabled. 

Our California Veterans deserve an advocate, and we as an organization will continue to be that advocate. We 
look forward to working with Secretary Johannessen. 

Thank you for the time today - God Bless America and God bless our Troops. 


/^^ From the Desk of 


^TjS Past District 9 Commander 

^^^ Founder Post 66 Palm Springs CA. 

39360 Peterson Road Sp. 100 
Rancho Mirage CA 92270 




Wednesday March 19 

1:30 PM 

Room 113 

I want to thank the Senate Rules Committee for inviting me to testify 
today. This is a historic moment for California. This is the first time an 
openly gay veteran living with HIV or AIDS has testified before the 
senate to confirm the secretary of the California Department of 
Veteran Affairs (CDVA). 

This historic day is possible because Sen. Burton, Sen. Kuehl 
and CAPE have opened doors so every member of society can 
participate fully in the legislative process. 

We know that the U.S. Department of Veteran Affairs is the largest 
single provider of HIV medical care in the United States. 
I support the confirmation of former Senator Maurice Johannessen 
because he understands that veterans disabled with HIV like me may 
have to reside in a state operated veteran home. Sen. Johannessen 
has pledged every veteran with an honorable discharge will receive 
equal access to state veteran benefits. 

In the past 4 years Governor Gray Davis has elevated the concerns 
of women veterans and has given LGBT veterans a seat at the table. 
Sen. Johannessen has pledged his continued support that we will 
have dignity for all veterans and discrimination will not be tolerated. 

The Senator knows: 

A veteran is a veteran is a veteran. 


I proudly support Sen. Johannessen's confirmation because he 
understands veteran benefits are too important to be made partisan 
issues. As you know I am founder of America's only certified 
Democratic Party veteran's caucus and I was co-chair of the salute to 
veterans at the 2000 Democratic National convention. Sen. 
Johannessen's military and public record has been to bring people 
especially veterans closer together. We owe it to California's 2.7 
million veterans and their families to work together in a bipartisan 
spirit of cooperation. 

I am speaking today on behalf of Blinded Veterans of America and 
California's only Catholic War Veterans Post 762 San Bernardino. 
Sen. Johannessen has pledged to do everything he can to give 
disabled veterans access to rehabilitation services and programs. 
As our veterans become older, transportation to VA hospitals is 
becoming a much larger need at the same time we face budget 
deficits. Sen. Johannessen has pledged he will work with the private 
sector to generate funds to maintain and improve transportation for 
our veterans. 

I urge the Senate Rules Committee to confirm Sen. Johannessen, a 
friend to all veterans. 

Thomas A. Swann 


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